In conversation with Steffen Knapp

As told to Sirish Chandran

I think we are established and part of the scenery here

“We are getting more Indian in a way. We have 320,000 cars in the field and the dealers can earn money in after sales. Now it is time for us to jump. Our vision is in five years’ time to be at 3 per cent, to double our volume.”

Safety was always key number one

“I think we showed extreme respect to our customers in India by bringing products in the market place which are technology wise absolutely advanced to our competitors. We want our customers in the safest cars and if you compare our products to our competitors, we are still ahead in terms of technology and safety. So we don’t have to wait for someone to tell us to bring in safe cars.”

I would like to have new cars every day

“It gives me huge opportunities. But look a little bit at the philosophy of Volkswagen. Our design philosophy has never been revolutionary and this has disadvantages and advantages. At the moment I tell my people in Wolfsburg, every three years the competitors come with some fresh substantial changes in a cheap manner – interiors, exteriors and so on. So they are changing their products dramatically. ‘Give me that’ I say. But if you look at the resale value development, of the Volkswagen brand in Europe, it proves that it is not the right strategy. That is the only area where I see India being a little bit backwards in terms of the automotive industry and that is the used car business. Managing trade cycles has not been fully established in the country. You need to have a clear focus on residual value and if you have that you are not changing your product every second because that is deteriorating your value. The moment you launch a new product with a completely different sheet of metal and interior, all you are doing is de-valuing it. In USA and Europe it is more residual value focused. And we have had up to 7-10 per cent difference in residual value versus our key competitors. It saves us a lot of money and our customers too.”

Used cars are going to be very interesting

“With the government saying, ‘I am only taking 12 per cent in GST’, used cars become very interesting. My dealers had stopped doing the used car business in the beginning of GST. Now with GST in place you can even think of taking cars from south to the north and vice versa, equalising the different residual values, and then come to a point where you might reconsider your product cycles.”

The Polo has much more elasticity

“We have been restricted in 2010, 2011 and 2012 to pretty much the so-called middle class affluent customers, who say, ‘Okay, I can afford this technology, this premium product.’ I think our product is still very competitive. The Indian customer wants to have new, shiny things. That’s the reason why we have action models. We did Volkswagen Polo GT TSI in the beginning, and it is a success. Today we are selling minimum 25 per cent a month on that (Volkswagen Polo GT TSI), and it continues to have a stable pricing, no aggressiveness in this product. Now we are looking at whether we can do similar things with the Volkswagen Vento and Ameo.”

We are working on that at this moment

“You are going to ask, ‘you have the Volkswagen Polo ready, developed in Europe, where is this car?’ But this car is more than 4000mm and it is not a sub-4m car and relevant engineering work has to be done to get it to that level.”

Motorsports is an opportunity

“I was the first MD who invited motorsport drivers to the annual dealer meeting to explain what they are doing. You need to have fantastic products in order to win a series and it proves also the technology and it is absolutely all about cars. Motorsports is really an opportunity. We are thinking what we can do because it is remote in India, it’s not fully integrated and we have to have a way of synchronising ourselves better. I think it’s the core principle. Look at the Volkswagen Polo GT TSI, it has always proved at motorsport. I had my own racing team also in my old days, which cost me a fortune as an MD, but it was so much fun and you can prove that you can win.  And an advantage in our race we will always win, because there are only Volkswagens.”

We have an electric roadmap for Volkswagen India

“What we are not going to do is to compromise on any product of our brand. And that means that the level of cost which you have in a car, and therefore the value for money for our customers outside, is to be balanced in the right equation. And I don’t see customers at this point of time willing to pay this amount of money for what is necessary. Since it is a young mobilising country, 19 people per 1000 have a car at the moment, there is a demand for getting mobility, rather than changing the way I use mobility at this stage. We will have a lot of people getting there and they are proud to buy a car – for normal engines, cost and value for money.

“As far as Europe is concerned, Volkswagen is going to electrify the car industry and as far as India is concerned, we will not be like Volkswagen of Europe, because the setup is different. We have technology available and we can go with this direction. That is our advantage. But my gut feel is there are a lot of changes necessary. What is going to happen to taxation and what will the scrappage programmes be with electrification coming and the replacement strategy? The government has not even decided on cars being older than 10-15 years. Are they [the government] going for electrification in this country at this point of time? I don’t believe so. Because they will be looking at their automotive cluster and it is not ready for electrified cars.”

“We now have people working from home, which was a surprise to me when I came to know it wasn’t existing, because we have a two hour drive for some to get here and some take minimum one hour to go home, which is crazy”

India can be very fast in adopting

“You think they are never going to make it, and suddenly it is standing there. Whether it is sustainable that’s the question. I went to Palladium mall in Mumbai and there were already some electric car charging plugs. We were in Kochi and every second hour, the power was gone in the hotel. If we have 600-700 cars plugged in at night to charge at the same time, is it so stable? I am not 100 per cent sure. So infrastructure wise this is going to be a challenge. But I am sure we will see them on the roads pretty soon.”

We want to retain world class talent

“There is a lot HR work to be done, like development of people, give them career paths. We are developing a competency framework for our people, about the necessary capabilities one needs to have in order to move to the next step in their career. We are giving our people the chance to go to other countries. We have currently six people working in other continents to develop and fully integrate Volkswagen’s philosophy in the organisations. It is important to cross develop those values by sending people out. And there is a growing demand because we have excellent people here. The first objective is to create an atmosphere of performance orientation, of liking to work here.

“We have now people working from home, which was a surprise to me when I came to know it wasn’t existing, because we have a two hour drive for some to get here and some take minimum one hour to go home, which is crazy, the amount of time spent in the car. Not everybody has the convenience of sitting in the back of the car, they have to drive or take trains.

“We are working hard to increase the percentage of women here. At the moment we have only 16 per cent and I have no lady in the sales department. Why?”