Case Study on Volkswagen in India

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Volkswagen in India
Volkswagen and Background
Volkswagen, also known as Volkswagen AG, major German automobile manufacturer, founded
by the German government in 1937 for mass production of low priced car for people. Company
is also tagged as “people’s car”. Company’s headquartered itself in Wolfsburg, Germany.
Volkswagen is 2nd largest manufacturer of cars in the world in terms of Volumes. Carmaker from
the land of makes like BMW, Mercedes held the tag of premium carmaker. The Company
launched its Indian operations in year 2001 with the launch of model, SKODA with an aim to be
dominant car player in the world market by entering Indian market that boasted 30% market
growth.
Challenges faced in entering Indian, new market.
Volkswagen with the flagship of Audi, Porches, Lamborghinis and Skoda held the image of
premium luxury brand of cars. Entering into an Indian market where Meagher 0.15 % of
population having potential to afford such hefty price tagged brands, was a big obstacle.
Company had an uphill task to rebrand itself, as car of “common people”. First point that
immediately pops up to tag “ common people” car is the affordability. The Price affordability is
significantly lower in Asian – Indian markets than European markets. On top of it , The
government of India posed huge export and import tariffs that made import of the cars and parts
even more expensive. Thus, inflating the sales price of these cars. German automaker was up for
a customization to a great extent to meet the Indian road standards. The Indian roads are more

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rugged. It meant the Car’s suspension system had to be overhauled to meet the local country
standards to launch cars. India’s Gas prices are among the highest in the world which meant Fuel
economy is the biggest factor when it comes to Consumer choice of cars, Company faced tough
challenge in redefining the mechanical engine to make it fuel efficient. Companies late entry into
Indian Market in 2001, when most of the other players had already captured the market share. In
Figure 1.1, It provides the market share of each company in recent times. It goes to show that,
Volkswagen faced stiff competition in semi- saturated market. Why I say” Semi saturated”
Because, Car affording population is very limited. Although, economy had been growing at 30
%. Still, to sell the flagship of Volkswagen, rated, as premium car brand was an uphill task.
Some facts about the market shares in Indian market.
The company had little strength also to come in as a player in Indian market. First, The Company
had a world brand image of a German perfection in Mechanical car engineering. The common

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people of Indian adore, the German engineering. This factor attracted the niche market segment.
Companies were willing to invest heavily with backing of high Financial and human resources,
which was a big plus. The area, they really had capitalized was Market study before making
executive decisions. The choice of Local production house versus imports of the cars was
critical. Further, The location of manufacturing was again a strategic decision. It helped to tap
the best of talent and put them into workforce. Another move that worked in favor, was knowing
the customer preferences - which was instrumental in designing the interiors/ exteriors of car
unit.
My SWOT Analysis – Volkswagen
Strengths
 German Engineering
 Experience in world market
 Detailed Market research
 Good Financial backing
 Advertising Tactics
Weakness
 Inexperience in Indian Market.
 Expensive Price tags of Cars.
 Expensive after sale services.
 Dealer network
Opportunities
 Tap high-end customers.
 Tap middle class (30 - 40 years) , high
earning class.
 Utility Car segment.
 Tap population segment entering first
time in car market. Huge potential.
Threats
 Other Players like BMW, Mercedez,
Maruti.
 Government policies on tariffs.
 Changing Customer preferences.

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Learning’s from the case study
After glancing over the case study, it provides insights on the importance of the market study.
The company adopted finest practices in studying the Indian Market and segmenting it based off
of different parameters like preferences, Income group, region and other influence s and then,
revolving their launching strategy around them was an A+ effort. It goes to prove that Market
study and then simulating it to the actual launching of its product is very critical to entering a
new market.
Advertising campaigning strategy adopted was very meticulously implemented like, To spread
out the awareness, tying up with the largest Newspaper, The times of India reaching out 6.8
million educated readers and placing the ads on the high profile reader’s page was an act to
show, the aggressiveness of the campaign. The strategy to choose different advertising partners
for each type of car was impressive. For example, Phaeton, a high end car, the epitome of luxury
with hand crafted interiors choosing, the high profile paper , Hindustan times and its cover page
to advertise in handwritten signature adds was a perfect example to give personal touch to the
advertisement and appeal to the targeted segment. Score rating against each image below has
supported the Volkswagen branded itself as the German creation of Quality, Perfection and
innovative product line as.

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The case study focused on the branding and advertisement aspects of the launching tactics.
Although, it is an very integral part of launching effort. But, Case study did not focus on grey
areas like Operational in efficiencies which lacked in Indian set up that had delayed the
Production units to compete with high production players like Maruti, Hyndai.In Manufacturing
operations there were bottlenecks like part supplies which for majority were imported from
Germany. This set up of import caused the delay in manufacturing units to meet the demands.
Also, It had been the reason for hefty price on some economy segment cars like Polo and other
mid segment cars like Skoda and Jetta. The Company eventually had to rethink and devise a plan
to open up local manufacturer of key parts to economize the cost of parts and speed up delivery

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of parts by cutting down the transportation and import cost from Germany. It had aimed to
locally source the content to 90% from 65-70% in 2018 data. These are some current facts on the
company radar as it plans to launch itself beyond 2018 and onwards.
My Views on What company could have done to better in its launching process.
Coming in to an Indian which is predominantly middle and upper middle class focused and
capable of buying the mid segment cars which, was already saturated by players like Hyundai
and Maruti , required a different strategy . Volkswagen could have partnered with an already
established Indian local Car player and established joint venture to launch Volkswagen in Indian
space. Just like Maruti and Suzuki had done before. The reason would have been obvious, This
would have helped Volkswagen to project in India as the common people’s car and tap the
already focused Market from the local players and could have projected the joint ventured brand
as a face lift. This not only would have impressed the loyal customer of that brand, but could
have capitalized on that brand further to launch the new models under the new umbrella brand.
The reason to focus on economy segment is very crucial as this segment gets a boost from
government in terms of lower excise taxes.
The premium flagship Cars could have been sold under its global brand name to upper segment
of the society. It is important because, the middle upper and high-end class has high preference
on status and brand conscious. The brand like SUV Tugeon, Jetta and Passat, which are priced,
tagged over 2.5 million rupees.

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Current Situation of Volkswagen in India and some Challenges
Since the beginning of Volkswagen in India, Its non- luxury brands Skoda and Volkswagen had
struggled to keep the sales curve on an upward streak. Premium brands like Audi, Porsche and
Lamborghini have done fairly well but they represent very small portion of the Indian market
segment. Company had lowered its market share targets to 7-8 % from estimated 20%. Primarily,
due to growing competition from strong players Like Maruti and Hyundai dominance in the
Lower and middle class segment. Higher Loan interest prevailing in market. Along, with above
reason, It is also fuelled by the Bharat stage – 6 target of fuel and emission control programs to
be achieved by 2020. This in general may push the consumer to delay the purchase of Cars
beyond 2020 to be compliance with the latest standards of emissions. In order to be successful in
india , company must have to focus on price, customized style and after service to be a top player
in Indian Market which is predominantly controlled by sentiments.
Sources:
1) https://www.financialexpress.com/auto/car-news/top-10-carmakers-in-india-and-their-market-share-maruti-suzuki-
owns-half-of-the-indian-market/1129193/
2) https://economictimes.indiatimes.com/vw-group-announces-1-billion-euro-investment-in-
india/articleshow/64826143.cms.
3) https://www.forbes.com/sites/greatspeculations/2014/09/29/can-volkswagen-succeed-in-india/#3900b4812661.

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