Volkswagen India charts out growth path

German car giant Volkswagen, which has been struggling to make a mark in the fiercely competitive car market in the country, dominated by market leader Maruti Suzuki and Korean brand Hyundai, is gradually on the growth track.

But in a strategic move, adopted by the company a couple of years back, that growth is coming more from exports than sales in Asia’s third biggest car market due to lack of new models to woo price conscious buyers in the country.

Despite the Volkswagen group being present in India for more than a decade and half, it could garner only a less than 2 per cent market share between the Volkswagen and Skoda brands.

The car makers in India together sold a whopping 3.4 million cars, the highest, in the domestic market last financial year.

Volkswagen, the world’s third largest car maker, and the maker of Vento and Polo cars in India, together with its Skoda Rapid model, produced 6 per cent less cars at 57,000 units in the calendar year 2017. It had produced 60,500 units for the Indian market last calendar year.

But it exports of Vento and Polo cars jumped to 10.17 per cent at 93,100 units this calendar year, up from 84,500 units exported last year.

Bulks of the exports go to Mexico, Argentina and South Africa and some other 35 countries.

In fiscal 2017, Volkswagen exports grew 14.30 per cent at 86,852 units, according to Society of Indian Automobile Manufacturers or Siam, the apex trade lobby. However, its sales in India were much lower at 50,042 units, clocking 22 per cent growth last financial year.

In November 2017, its exports stood at 7,472 units, a growth of 62 per cent over November 2016. But its sales in India fell by 15 per cent at 3,426 units in November 2017. Its popular Vento sedan model was the highest produced car in 2017, contributing to more than half of the total production, the company said in a statement.

The total car production at Pune factory crossed 8,70,000 units since its inception in 2009.

“Increased demand from both domestic as well as export markets brings in the additional volumes for the Volkswagen Pune plant,” Andreas Lauermann, president and managing director at Volkswagen India, said.

He said Volkswagen India has once again registered positive growth. “We believe in delivering top quality cars that are engineered to the customers’ expectations,” Lauermann said. He said Volkswagen is committed to India and it was setting itself up as a serious competitor for the future.

The company’s factory in Pune, with a total investment till date of ₨ 5,720 crore, has an installed capacity to produce 2,00,000 cars annually in three-shift system. At present, it manufactures Volkswagen Polo, Ameo and Vento and its Czech brand Skoda Rapid model.

Significantly, the plant has achieved a localisation level of approximately 82 per cent (without engines and transmissions).

The Volkswagen factory in Pune is the only German car manufacturing plant in India that covers the entire production process from pressing parts to final assembly.

Apart from the cars, the facility also assembles the 1.5-litre and 2.0-litre diesel engines.

With a workforce of 3,600 employees, the plant has been operating in three shifts since March 2016 to meet its growing export demand.

Michael Gonsalves