Michael Mayer took over the role of Brand Director for Volkswagen Passenger Cars in India about a year ago. We sat down with him at VW’s plant in Chakan, just outside Pune, to get his views on his first year in India and the challenges faced by Volkswagen in the country – and, of course, to hear their plans for the next few years.
It’s been about a year for you personally in India. How has year one been?
It’s very interesting. The market has seen a complete change from a depressive market to a forward marching, increasingly growing market. We’ve seen very positive signs from the interest rate and fuel price front, which makes it a totally different picture from the time I was looking to come to India – this obviously makes life much easier. And from Volkswagen’s side, we’ve seen a turnaround in the brand, which has been supported by products like the Polo. The biggest surprise, for me, has been the acceptance of DSG in diesel, which has allowed us to get up to 40% of our clientele in this class to adopt a relatively expensive technology. This has given us the confidence to further invest in the brand, our portfolio, and our dealer network.
On a personal level, do you get time to put your feet up at all? How do you relax?
You do get time, of course. I have my family with me, and they enjoy living in India quite a lot. On top of that I’ve gotten around India a little bit as well – Goa, Rajasthan, Agra, the usual sights that you see first. And it’s tremendously interesting to see the diversity of the country. It’s totally unexplored by Western classical tourism routes – and that I enjoy very much.
From a VW perspective, what are the three biggest challenges that you face in India?
Well, if you have 2% market share, your challenge is obviously to stay relevant in the market. The second challenge is that it’s a very price competitive market that’s mainly dominated by – let me put this without being disrespectful – cheap cars! So, if you want to market technologically advanced cars at a price, you always face a challenge. But this is something that takes time, and we need to consistently educate and inform the customer about exactly what he gets for his money. And safety, for instance, is a part of that.
On the topic of safety, do you think that customers are actually getting receptive to the message – is safety of more relevance to them more now than it was in the past?
It is very relevant to some customers. To give you an example, I saw a customer in the workshop recently with a Polo that was involved in a crash. We looked at his car, and all the energy had been absorbed by the front of the car – not even the windshield was broken. He showed me some pictures of the other car, a locally built car, which was completely crushed – and people had sadly suffered injuries. So, for him, it was completely relevant. The other aspect is that safety is a broader field – it’s not only airbags. It has to do with the enforcement of traffic laws, driver training, and road quality. But, having said that, the auto industry certainly needs to do its part. One interesting point is that we’ve added dual front airbags recently in all our models, and the base variant of the Polo has seen a hike in sales since then. Whether this is only because of the dual airbags, I don’t know – but giving customers the entire package in an entry-level car makes it more interesting for them.
The Polo is known for its superior dynamics. How do you communicate that aspect to consumers?
Communicating dynamics is almost impossible because you have to feel dynamics. That’s why we heavily promote test drives. Yes, my dealers have a target of how many enquiries they should be getting. But the most important target is test drives! Everybody who enters a Volkswagen dealership should be given a test drive because only that makes you feel the build quality and driving dynamics. Our other focus is on communicating the safety features in the car. Some people don’t know what an airbag is. So, we have to actually make the size and the nature of airbag visible with a dummy. It creates confidence, and also makes people think – why should only I have an airbag, when my wife in the passenger seat would hit the dashboard?
Another challenge for Volkswagen has been your dealer network and the perception that your cars are more expensive to maintain than the competition. How can you tackle these challenges?
If we look at the real cost of service, we’ve done the analysis – we are not more expensive than the others. Our cars come in for service at 15,000 kilometres – that’s what they’re engineered for. Our competitors’ cars are serviced at 7,000 kilometres. So, if you make a comparison at 30,000 kilometres, the other customers would have seen 3 or 4 services while ours would have had two services. So, the cost of one service may be slightly different, but there isn’t much difference in the service cost per kilometre. On the other hand, yes, we have seen that some of our parts pricing was not right. But we’ve set that right now. And we are providing customers with menu pricing boards, which we’ll soon bring into the public domain – so that you know what the regular maintenance cost of your car is.
When it comes to the dealer network, we’ve seen a turnover that was probably higher than it should have been. And the focus on customer satisfaction hasn’t been as high as I want it to be. But this is being tackled now. And we’re starting a campaign to bring this cultural change into the broader network. And I’ve seen some very positive responses by our dealers – their performance has gone up in last six-to-nine months, both on customer satisfaction as well as business performance. But, to sum it up, to establish the customer-first approach in the network is a long process. We know that we need to improve to live up to the aspiration of the brand.
Coming to the sub-four metre sedan that you’re developing – if you look at the sales of the i20 recently, which is a premium hatchback in our market, Hyundai has been very successful. So, wouldn’t the Golf make more sense rather than building a sedan specifically for this market?
I think that there are two points to make here. First, an i20 is not a Golf. It’s in a different class. The Golf class doesn’t exist in India. That’s an opportunity and an obstacle if you want to bring it here. The i20 clearly tells me that Indian customers want to move up in the size and package of their car. That’s the first point. The second point is that if you look at Hyundai’s performance in the sub-4 metre sedan segment, it’s not really hampered by the i20. There are an increasing number of customers who want a sub-4 metre sedan – for whatever silly reason, they like these cars! And that’s why we think we need to look at both aspects, which is what we’re doing. The first step is entering the sedan segment as fast as possible because we need a Volkswagen there. The second phase will be a discussion around how we expand in the hatchback segment, and where is the sweet spot for the next two or three years – which is something that you’ll just have to wait and see.
You’ve decided to bring in the next generation Tiguan into the SUV space in India. Won’t that be priced higher than you would have ideally liked?
With our brand’s position, we need to come top-down – that’s the answer to your question.
Overall, how do you see the market developing in the next couple of years?
I’m an optimist. And I’m in the country of the eternal optimist. So I think it’s going to go well. It is going to be a bit rocky and bumpy, but it will go upwards. It will not explode, but it will go upwards. And that’s what I tell the senior management of my company – that we’ve got to have an eye on India, because sooner rather than later, we need to sell more cars here.
We’ve seen some upheaval at VW HQ, with Dr. Piech resigning. Will that have any impact on Indian operations?
You’ll understand that I won’t comment on that. But it’s nothing that concerns me too much at this point.
Volkswagen Pune Plant
Following our chat with Michael, we also got a tour of the VW plant in Chakan, outside Pune. And it’s only when you take a look at the precision with which these machines are built that you begin to appreciate the quality of a machine with the VW badge on the bonnet (or Skoda as well in this case, as the plant produces the VW Polo, Vento, and the Skoda Rapid). The plant was commission in 2007, and was completed in a record time of just 17-months. The first car rolled off the assembly line on the 31st of March 2009. Ever since then, VW has been attempting to increase the localisation levels in their cars, to increase competitiveness. Towards that end, they finally began engine assembly earlier this year – and so the 1.5 litre TDI engine is now assembled in-house. The engines are tested using a Cold Test stand, Hot Test bench, an Engine Dyno, and a full-fledged engine testing facility. The body shop, meanwhile, has a unique laser welding process, while the paint shop has a 13-step painting process. All this activity is coordinated between the 2,000 employees and 100+ robots on the shop floor is coordinated with Germanic precision. After watching them work in unison, you appreciate the finished product that little bit more.