IMB 443
SEEMA GUPTA
VOLKSWAGEN IN INDIA
In just 4 years since Volkswagen (VW) set up its India operations, it had captured a 3.6% market share - something the Detroit giants had not been able to do after more than a decade in the country (Exhibit 1). VW was the flagship brand of the Volkswagen group, which also owned Audi, Bentley, Bugatti, Lamborghini, Porsche, SEAT, and
Skoda. In India, the group was present with Skoda, Audi, and VW.1 Maik Stephan, Managing Director, Volkswagen
Group Sales India said:
While three brands give us the collective power, we have to be careful to market them uniquely so that we are not chasing the same customer.i
In 2011, the group’s worldwide revenues and net profit were Euro 159 billion and 15.8
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Volkswagen in India
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Jetta was launched in 1983 and Phaeton in 2002. Thereafter, New Beetle was launched to recreate the magic of the original Beetle.
The group entered India in 2001 with Skoda. Its plant in Aurangabad assembled a few models of Audi and
Volkswagen as well. Audi and Volkswagen were launched in India in 2004 and 2007, respectively. In 2010, a stateof-the-art production facility was set up at Chakan near Pune with an investment of Rs. 35 billion to manufacture Polo and Vento indigenously. The plant also manufactured Skoda Fabia and Skoda Rapid as they were built on the Polo platform. Despite sharing common product platforms, the three brands were distinctly positioned.
Skoda was positioned as less premium than VW which was positioned as more premium than even Honda and
Toyota. Audi was positioned at par with BMW and Mercedes in the luxury category (see Exhibit 2 for positioning of various players). While the group integrated the back-end of technology, human resource, and finance across the three brands, the front-end of dealers was scrupulously kept separate.
Despite its careful planning, there existed an anomaly. Skoda was perceived to be a more up-market label than VW in
India. This was owing to Skoda’s history in India. Skoda was launched in 2001 with the Octavia, a premium car.
They are one of the top selling car industries in the world with Volkswagen Golf being an
From beginning, Porsche had positioned strategically in the niche market industry for the ability in producing a high quality luxury sport car.
The Volkswagen Group follows a cost leadership and differentiation strategy. The Volkswagen Group achieves low cost leadership by sharing automotive parts amongst its products and as well as sharing vehicle platforms amongst the other 12 brands under the Volkswagen Group, such as Audi, Bentley, Porsche and Volkswagen Passenger Cars. The Group improves product differentiation by focusing on the product quality improvement, innovation and sustainability. This differentiation strategy helps ensure that the customers are satisfied with the products, and that the customers will be willing to pay a premium for the product.
The industry for superior luxury cars is a highly exclusive one with a few automotive makers making their presence felt. The major market share is held by Porsche which is known to have formidable rivals like Benz and BMW. The SUV supercar segment is a highly evolving one where manufacturing style localities and units are the decisive forces that ultimately culminate towards the cost of the car.
In fact, the brand name was even vital than the marketing itself. At this level in the UK market, Audi was prescient. They produced vehicles of high quality and were consistent and continuous. Brand building and brand marketing forms an integration of the continuity improvement mainly displayed in the UK markets and improved levels of services. Success of marketing band had a direct impact on the creation of awareness of luxurious brand and loyalty of consumers, and none of the luxury car firms could be overlooked. As the loyalty of the brand is majorly because of the domestic customers, improvement of quality services and establishment of a good name is of great
Volkswagen was founded in 1937 but they were known as Gesellschaft zur Vorbereitung des Deutschen Volkswagens mbH. In that same year, they renamed the company to Volkswagenwerk, which stands for “The people’s car company,” (This day in history). Volkswagen was doing great in business and did not have any scandals or issues until the year 2005. Volkswagen started pushing for a diesel line in their industry, but not just any diesel line, they wanted to make cars diesel. They did just that and everything was going great until the May of 2014 when West Virginia University Researchers published a finding of significantly higher in-use emissions in the 2012 and 2013 TDI models (Barrett and Speth, 2015).
Continuing after this point, Porsche has consistently maintained a growth in revenue. According to Henderson & Reavis (2009), “Per unit produced, Porsche records an average of $91,974, and by 2007 their annual income capped at $9.4 billion on revenue of $10 billion.” With this growth it must be mentioned that the firm has experience some down points. For example, in the mid-1990s due to poor production processes and a recession in the United, which seriously affect sales nearly pushed Porsche Automotive Group into bankruptcy. In the end this led to a time when the firm was vulnerable to takeover. Another such time would be in 2008 when the firm’s business integrity would come into question due to their actions surrounding the failed takeover of their former sub-division VW.
Skoda is a tradition bran but it sis designing cars that meet the changing lifestyle of the people. It offers cars at high quality and good value and cars that customer will love to drive.
There will be no change in the design house’s long standing agreement with other auto makers, and there are no plans to relocate the company to India. Pininfarina will
Volkswagen-FAW Engine (Dalian) Co., Ltd., founded on 06.02.1991, is a Sino-German joint venture of Volkswagen (China) Investment Co., Ltd., and China FAW Group Corporation. The total investment is about 15 billion yuan in registered capital of nearly 10 billion yuan. Of which Germany accounted for 60% and China accounted for 40%. The total program for annual output of 300,000 engines.
As we can see the percentage of passenger vehicle in India is less compared to two wheelers but it is still at a good growth. Many companies for example ford, BMW, Nissan, Renault have invested in India as the growth of automobile industry is rising an India is second largest populated country in world after china.
The Volkswagen Group is one of the world’s largest and leading automobile manufacturers and the largest carmaker in Europe headquartered in Wolfsburg (The Group, 2013). In 2013, Volkswagen managed to increase the number of vehicles delivered to customers from 9.276 million to 9.731 million that corresponds to a 12.8 percent share of the world passenger car market (The Group, 2013). One in four cars in Western Europe is made by Volkswagen; the sales revenue was €197 billion and profit after tax was €9.1 billion (The Group, 2013). Volkswagen Group in total consist of 12 auto brands from Europe, and these brands are Volkswagen Passenger Cars, Audi, SEAT, ŠKODA, Bentley, Bugatti, Lamborghini, Porsche, Ducati, Volkswagen
Skoda progressed so well improving the efficiency and attractiveness of its car that in 2006 it won 4 awards consecutively in different parts of the world.
One potential threat for Volkswagen is that Toyota may respond strategically by also cutting its prices. However, given Toyota’s quality problems over the past year, they will not be able to lower prices, as this possibly would create the perception of lower quality.. First and foremost, Toyota needs to ensure it handles its quality problems to its customers’ satisfaction. The auto maker needs to ensure the public perception is that Toyota is being upfront, honest, and responsible in dealing with recalls and the
Initially the industry primarily had Enfield Bikes (350cc) and Escort (175cc), and after the 1980s, when the market was opened up, the competition started flowing in with Hero Honda( a JV), TVS, Suzuki. The companies initially started off with assembling the completely knocked down units that were imported from other countries and then gradually started domestic production in India. Majority of Indians, especially the youth prefer 2-wheelers rather than cars as they help in easy and cheaper commutation.