Source: www.rushlane.com Premium carmaker Volkswagen India has ruled out price cuts on its cars though sales continue to dwindle and growth slowed down to snail’s pace compared with industry leaders.
Instead, it is looking at firming up after-sale processes like dealer interaction, servicing and offering an additional fuel option in the form of compressed natural gas (CNG) to scale up sales from current stagnant levels of around 7,000 units per month.
The German carmaker’s sales grew just two per cent to 20,644 cars on a relatively low sales base in a revived car market during January to March against an industry average of 21 per cent at 637,731 cars.
“We need to find answers as our sales are not up to industry benchmarks such as Maruti Suzuki and Hyundai. We have to sit back and see how we are doing qualitative things like customer interaction and after-sales,” accepted Neeraj Garg, director- passenger cars, Volkswagen group.
Volkswagen is offering freebies up to Rs 50,000 on its petrol cars and has recently started freebies on its diesel cars as well by offering insurance free worth about Rs 15,000 on its diesel variants of Polo and Vento.
Industry rivals such as Maruti Suzuki, Hyundai, Toyota and General Motors, are not offering any freebies on diesel cars with huge demand backlogs leading to significant waiting periods. Garg claimed that the low sales growth was on the back of presence in just 40 per cent of the passenger car market.
Japanese premium carmaker Honda that operates in same segments such as Volkswagen, had to cut prices of its cars last year by over Rs 1 lakh on its compact cars such as Jazz and City to compete on a bigger scale with the big players.
Its monthly sales have now crossed 10,000 units this year compared with average of 5,000 units last year. “We will not resort to price cuts because of brand positioning. I don’t know if Honda is earning profit on its cars (after price cuts),” Garg responded. Volkswagen Group aims to sell one million cars in India by 2018 (including group brands Skoda and Audi) compared with about 111,623 cars in 2011.
While the cream of the industry, including Maruti Suzuki, Hyundai, Tata Motors and General Motors, lined up a slew of car launches this year, Volkswagen does not have any significant launches that may propel growth.
Garg said VW’s cars like Polo and Vento are still new as they were launched just one to two years ago. At the time of launch during 2010-11, VW had failed to live up to the hype of its cars in terms of sales despite spending huge sums on advertising because Polo and Vento had a long waiting period — as long as eight to nine months — deterring buyers from purchases. The issue was low production due to ‘quality’ build up in its production processes.
“The small car segment is very competitive and if a manufacturer wants to create a dent in this market, it has to create value-for-money perception for its products. Unless customers are concerned about value propositions, it is very difficult to make a dent in this highly competitive segment,” said Abdul Majeed, auto practice leader, PwC. The Volkswagen Polo costs about Rs 4.67 lakh and sells about 3,500 units a month since its launch against the leader Maruti Suzuki refurbished Swift that’s priced at Rs 4.22 lakh selling more than 20,000 units a month, compared with previous year levels of 12,000 units per month.