Volkswagen to Indianize Their Spare Parts Sourcing

It’s been 5 years since Volkswagen came to India. Since then the company has managed to grab only 2.1% of the market share. One of the main reasons of this low number is its high-end prices and lack of a diverse mass-market product range.

Also, the problem has been compounded by India’s worst economic slowdown in a quarter of a century. This slowdown has depressed passenger car sales for the last two consecutive years that ended on March 31, this year. It has forced the German car-maker to step up sourcing of components from India to cut costs and broaden its appeal. Volkswagen will increase the amount of locally-made parts in the cars it sells in India to cut costs and lift falling sales in a competitive market dominated by cheap compacts.

Shortage of service centers has also been the reason of low sales.

“Indianisation is certainly a key word we learned about,” said Michael Mayer, director, passenger cars at Volkswagen India Pvt Ltd. “We need to make the cars more adapted to the taste of the Indian customers.”

The company has at last realized that buyers are veering away because of the high cost of buying the product in the first place, combined with the premium priced spare parts. Volkswagen’s production costs aren’t as low as Maruti Suzuki’s or even Hyundai’s. Their service back up isn’t as widespread and their spare parts aren’t as easily available or affordable. Their cars apparently aren’t as reliable either, as break down complaints are rather high as well. The brand has also been marred by allegations of supplying defective units.

When asked about the company’s stated aim of achieving around 10 per cent market share in India, Kodumudi said, “You have to face reality of the market. It is not growing as forecasted earlier. We remain committed to the market and will try to increase our presence.”

This German carmaker is said to invest Rs 1,500 crore in India over the next 6 years on various activities, including local production of engines. It aims to consolidate a healthy position in the country. The company recently launched an updated version of its premium hatchback Polo priced between Rs 4.99 lakh and Rs 7.37 lakh (ex-showroom Delhi).