Is Volkswagen Quitting The Indian Market? Nope, It Isn’t!
German automotive giant Volkswagen, in recent years, has made big headlines in the country. It managed to turn around its sales in India with its India 2.0 strategy. However, recent comments from Skoda Chairman Klaus Zellmer have raised speculation on whether the Volkswagen group could actually exit India. Nope, that’s not happening, and Volkswagen’s here to stay.
But what spooked Volkswagen buyers and fans, so much so that many prospective buyers were found questioning if they should even go ahead and buy their favorite Skoda/Volkswagen? Jump right in to find out what led to social media chatter on Volkswagen’s rumoured India-exit.
Volkswagen and Skoda’s India 2.0 Plan
Before we find out if the German automaker, along with its Czech carmaker subsidiary Skoda, will exit India or not, we have to go back to where it all started. Let’s circle back to 2018 – to Volkswagen’s India 2.0 strategy. Back then, Volkswagen’s operations in India were handed over to Skoda, and currently, the Czech carmaker is the one that manages Volkswagen India.
With this strategic initiative, the company aimed to revitalize both brands in one of the world’s most competitive automotive markets. Fast forward to 2024, Klaus Zellmer, the Chairman of Skoda, has recently made some comments that have described India’s car market as “predatory.”
The main reason behind this statement is the Indian car market’s extreme competitiveness and price sensitivity. These remarks from Zellmer are the primary reason for numerous discussions about Volkswagen’s commitment to the Indian market.
Challenges Faced by Volkswagen in India
Volkswagen, despite the strategic efforts under the India 2.0 Plan, the company has struggled to gain significant traction in the Indian market. Its current lineup, including models from Skoda – Taigun, Virtus, Kushaq, and Slavia, have not achieved the expected sales figures.
According to experts and buyers, one of the primary reasons for this underperformance is perception. Many people believe that these cars do not offer the same ‘value for money’ as their competitors mainly in terms of features offered for the money charged. Indian consumers, who are highly price-conscious, often find more affordable alternatives that offer comparable or additional features.
Klaus Zellmer has also pointed out that the high cost of Volkswagen and Skoda cars is a significant barrier to sales. He believes that these vehicles are over-engineered. This leads to higher production costs that are then passed on to the consumer.
In order to address this issue, Skoda is actively seeking a local partner. With the help of this new local partner, the company aims to understand the Indian market. If the company can find such an Indian partner, it could help it produce cars at a more competitive price point.
Where Volkswagen-Skoda Aim To Go From Here
Skoda is currently exploring partnerships with local manufacturers. With this strategic partnership, the company aims to better align its offerings with the preferences of Indian consumers. One of the most prominent contenders for this partnership is Mahindra & Mahindra.
Mahindra, over the years, has created a history of collaborating with international automakers. A few of the most notable partnerships in Mahindra’s portfolio include tie-ups with Ford, Renault, and the acquisitions of SsangYong and Reva Electric.
Unfortunately, Mahindra, over the years, has also not been able to successfully run any partnership. Many of Mahindra’s collaborations have faced challenges. They have often resulted in Mahindra either divesting its stake or ceasing operations altogether.
At this point, the prospect of a Volkswagen-Skoda-Mahindra partnership brings mixed feelings. On one hand, Mahindra’s extensive experience in the Indian market could provide valuable insights into consumer preferences.
This could help Skoda and Volkswagen tailor products more effectively. Additionally, Mahindra’s established manufacturing capabilities and distribution network could also streamline operations and reduce costs.
On the other hand, the history of Mahindra’s partnerships raises concerns about the potential success of this collaboration. The previous alliances, though initially promising, often fell short of expectations.
This happened either due to market conditions or strategic misalignments. With this track record, it naturally leads to apprehension among consumers.
Why Customers May Feel that Skoda and Volkswagen Are Quitting India
With the above-stated comments from the head of Skoda India, it is natural for Indian customers to wonder if the two brands are about to quit their operations in India. But for those who may still want to know more reasons behind this thought, here are those reasons:
Repeated Searches for Local Partners
The ongoing efforts by Volkswagen and Skoda to find a local partner are not new. They have been persistently looking for a local partner for a long time. This suggests that they are struggling to establish a strong independent presence in India.
High Costs and Poor Sales
As stated above, the perception that their cars are too expensive for the Indian market and the resulting poor sales figures contribute a lot to the speculation about their potential exit.
Mahindra’s Partnership History
If Skoda and Volkswagen do end up in a partnership with Mahindra, the track record of Mahindra with its past partners can be a little worrying. There have been many collaborations that ended with Mahindra selling its stake or shutting down operations. This raises doubts about the success of any new partnership.
Zellmer’s Comments on the Market
Klaus Zellmer’s remarks about the Indian market being predatory and highly competitive have added to the uncertainty and apprehension. Many people believe that if the company cannot find a solution, they might end up leaving the country like Ford and Chevrolet.
Industry Exits and Downsizing
Another major reason behind the speculations of Volkswagen and Skoda leaving India are the other recent exits. Companies like Ford, Chevrolet, and Fiat exited India, and many fear that Volkswagen and Skoda might also join the list. Other carmakers which have not left India are currently downsizing. This list includes Honda and Renault.
Volkswagen’s Future Plans in India
Before we jump to the conclusion, we have to note that despite these concerns, Volkswagen and Skoda have outlined their future plans. This suggests that there could be a continued commitment to the Indian market.
Both brands are set to introduce new electric vehicles (EVs) in India, including the Volkswagen ID.4 and the Skoda Enyaq. These models are part of Volkswagen’s global strategy to shift towards sustainable mobility solutions. They are also aiming to cater to the growing demand for EVs in India.
The ID.4, known for its impressive range, and the Enyaq, with its stylish design and tech-forward approach, are expected to attract a new segment of environmentally conscious buyers. Additionally, Skoda is testing a sub-4-meter compact SUV, which is expected to launch soon.
This new compact SUV is designed specifically for the Indian market. The aim of this SUV is to compete with popular models from other brands that have seen success in this highly competitive segment.
Additionally, Volkswagen and Skoda are working on expanding their after-sales service network and enhancing the customer experience. They have planned to introduce innovative service packages and extended warranties. They are also providing improved customer support to build trust and ensure long-term loyalty among Indian consumers.
Is Volkswagen Quitting the Indian Market? Nope!
While the concerns and speculations about Volkswagen’s future in India are understandable, from what we can note, the company’s current plans indicate that it will be staying in the Indian car market for a while. However, their success will largely depend on their ability to adapt to the unique demands of the Indian market.
These demands include competitive pricing and value-for-money offerings. If the company manages to find a reliable Indian partner, it could still thrive in India. At the moment, it’s clear that Volkswagen and Skoda are here to stay.