Opinions

Recovery can be faster if government gives incentives: Steffen Knapp, Director, Volkswagen Passenger Cars India


Steffen Knapp, director of Volkswagen Passenger Cars India, said recovery in India could be slower than in China and sales could be under pressure until August. In an interview with Nehal Chaliawala and Satish John over Skype, Knapp discusses the company’s strategy and the need to tailor the offer structure. Edited excerpts:

How is Volkswagen’s strategy to exit from the lockdown shaping up?

We have 80-85% of network operating again. We started production on June 1 at our Chakan plant and in Aurangabad about two weeks ago. Clearly, it is coming back to a certain form of normal. India had the hardest form of lockdown, so the complete supply chain has been basically stopped. To get this back again will take some time.

Is the worst behind us?

I see it improving, definitely. The moment you have an interesting offer in the market, there’s some elasticity. We have been less affected in May than others. The overall industry went down by roughly 85% versus last year, and we went down by 47%. That is related to an interesting offer on the Polo and Vento. We are now tracking activity at 60-65% of previous levels. This is with only 33% of previous manpower. June to August will continue under pressure, but then we should see a major improvement during Diwali time.

Is a sectoral stimulus necessary?

I am an economist. I believe the free economy has a duty to make interesting offers. We need to tailor them to current needs — be it fully sanitised service and sales channel or interesting financial packages. Governments have two functions. First, they have to make a stable framework so in high investment areas like the car industry, we have a foreseeable future. At the same time, I think they can lead to faster recovery by putting certain incentives in the market. Awin-win situation for everyone could be a scrappage programme. You are taking out the old clunkers, the government can earn via GST, and we can give a stimulus for customers to come and exchange their product.

Could the post-lockdown recovery in India mirror that of China?

When you compare it to China, the coming back is slower. Basically, they had a swing of one and a half months and this is not going to happen in India. In India, we will see a longer phase. We had 61% reduction in March, 100% in April, 85% in May. Let’s hope we will get to 50% cut in June, and then we should come back. And then in Diwali, when we have a lot of positive sentiment and we see that the peak of the crisis of Covid-19 should also be over, then we will have a better situation.

What’s the response to leasing?

Well, it’s just been launched last week. Leasing in India is pretty small. It’s definitely going to come to India and get a major push now, given that people really don’t want to take the risk of owning the product and having to deal with the issue of residual value.

Is your dealer channel consolidation into fewer, larger partners done?

In principle, we have completed it. We now have 60 investors (dealers). I think we were at 87 when I came. We reduced the number of investors, but increased the number of touch points. I’m very proud to say our dealer partners have paid salaries and we have no job losses so far in the network.

Has the lockdown affected Volkswagen’s India 2.0 plan?

There is no plan to delay. We are focusing on India 2.0. It’s the backbone of our strategy. Although we have not put our new cars Tiguan Allspace and T-Roc into showrooms yet, we have sold a majority and started the delivery.





READ SOURCE

Leave a Reply