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“Propensity to consume is no longer restricted to Tier I cities”
Lutz Kothe, Head – Marketing, Volkswagen (I), talks about how why the automaker is serious the Indian market and how Tier II & III markets are key to its success
Issue Date - 30/05/2012
B&E: Till date, Volkswagen has been successful in establishing itself in the Indian market. According to you, what factors are responsible for this success?
Lutz Kothe (LK): A clear strategy, a relevant product line for the market, a consequent dealer, sales and after-sales ramp up and some clutter breaking communication has led to where the brand stands today in the Indian market.

B&E: VW has maintained a premium positioning in India so far. Any particular reason for it? It does appear to have worked out well for the company till date – but would you maintain this ‘premiumness’ with every new introduction in every new segment that you enter?
LK: VW in India is indeed a premium volume brand with a clear positioning. The brand delivers high quality, innovative yet affordable products in combination with a unique buying experience and a good after-sales service. Irrespective of what products we introduce in which new category, we will continue to maintain this positioning in every segment. And why not? It has worked for VW so far!

B&E: Products like the Polo and the Vento have been able to create credible space in their respective segments in India. But surely, VW has bigger plans for India than just making some mark in the hatchback and mid-sized sedan segments. Doesn’t it?
LK: We have already established a plant in Chakan, about 34 km from Pune. So we already manufacture locally while continuing to introduce some of our best models from the global line up in India. Also, we have expanded our customer touch points across 87 cities within 4 years of entering India. All these are some signs of how serious the VW group is about the Indian market. Our aim for the long term is to be amongst the largest players in the fast-growing Indian market. In terms of contributions to our global revenues, India definitely has the potential to become a top market. And the results when it comes to brand positioning, product, sales, dealers and after sales are already very promising for the future.

B&E: How different and similar is the Indian consumer as compared to consumers in the more mature markets?
LK: India is unique. The consumer is extremely value conscious, while at the same time he is very emotional. First the Indian customer wants to show what he has (Desire) and then he asks for the mileage (Ratio). The Indian customer is excited and reacts immediately to changes – this is not the case in mature markets.

B&E: With a huge price differential between petrol and diesel currently, the Indian market is moving fast towards ‘dieselisation’. Good news for VW or not?
LK: This trend is a perfect example of how consumers in India react immediately to changes which has currently changed the market dynamics to a great extent. For VW, ‘dieselisation’ is a very positive change as we invented the TDi Technology, which is outstanding when it comes to torque and performance that diesel cars deliver. The change is welcome as we have diesel variants across our basket.

B&E: VW is working on a strategy to expand its presence in Tier II & III locations. Given that up to 60% of auto sales in India come from Tier I, do you think this move makes sense?
LK: Aspirations and propensity to consume are no longer restricted to the Tier I cities. So, the smaller towns and cities do hold great potential to enhance our customer base. This is our belief and we are confident of this. We can’t ignore the smaller towns. Not even if we are VW!



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