Founded by Nazi Deutsche Arbeitsfront in May of 1937, Volkswagen (VLKAY, Financial) today has 72 production plants in 21 countries across the globe. From economical passenger cars to luxury vehicles and trucks, it is rated as the largest automobile manufacturer in the world.
Known for its R&D initiative and innovation in technology across its segments of vehicles, it enjoys net revenue of $135.4 billion and an immensely dedicated clientele.
Volkswagen’s smart strategy of acquisitions has helped it gain foothold into the lower-end affordable car category. Its primary target has been to capture the market share of ‘Fiat’, reputed to be the largest car maker in Europe. Volkswagen has never had a share in the car industry of Eastern Europe. Let’s find out how Volkswagen plans to expand across the globe.
Expanding into the emerging economies
Volkswagen entered into India-based operations in 2010. It has ambitious plans of claiming at least 20% of the Indian car market share by 2018. However, though it enjoyed a healthy volume of sales with its premium brands of Porshe, Lamborghini, and Audi, this constituted for a miniscule portion of the overall sales. It witnessed a struggle with its non-luxury brands like Skoda.
Starting from this year, the group has announced that it would launch a new product every year. Despite the demand for small cars being higher in India, there has also been a slow but sure increase in the demand for larger vehicles in the sedan category and SUVs. This is a welcome sign for Volkswagen which is now hoping to see a growth in the demand for its bigger-sized vehicles!
Volkswagen completes 15 years of operations in India having started with its Skoda brand in 2001, followed by Audi and Volkswagen in 2007. With more than 70 dealerships in 18 states and 2 union territories in India, it has more than 16 models and has sold more than 19,000 vehicles till date.
The company has devised a strategy of targeting the 18+ age group segment of the country which looks to be working for the auto maker since India is a country dominated by the youth segment and more than 60% of the total population demography falling in the targeted category.
Number Mix
Its eco-friendly approach in the manufacturing of its cars, its priorities on customer satisfaction and quality have changed its fortunes in a competitive market. The automotive major plans to invest a staggering $89.6 billion between 2014 and 2018 to develop greener technologies and to build environmentally friendly production units in India.
New models and new technologies are the areas in which it plans to invest more than $8.5 billion in the next few years and hopes to achieve phenomenal sales of more than 10 million cars in emerging economies like China, Brazil, Russia and India.
In India, the annual vehicle sales are expected to hit the 4 million units mark this year. Volkswagen is hoping to increase its market share to around 6% to 7% in India by 2018 and cash in on the rising trend of car sales in India.
Interestingly, Volkswagen was the first company in India to use LinkedIn (LNKD, Financial) as a channel for ‘recommendation Ads’ and the campaign was a great success. When it rolled out the campaign, in less than 30 days 2700 Volkswagen fans recommended their favourite cars and shared their recommendations, with their individual professional networks.
Takeaway
A respected brand by both critics and enthusiasts, Volkswagen can proudly say ‘we’ve come a long way! And in its spree to overtake Ford (F, Financial) and General Motors (GM, Financial) on a global basis its focusing now on India to grow in the developing markets. India has already enjoyed the centre stage of attraction with the major global IT players and now the auto industry is focusing on the subcontinent obviously because it houses the second largest population in the world which gives a huge customer base for any business to showcase their products. Along with this the upbeat economic environment of the country with a stable government incentivising business through its ‘Make in India’ initiative has received accolades from several global businesses. Quite a number of them like Ford, Volvo (VOLVY, Financial), GE (GE, Financial) and GM have already set sail to reap the benefits of the rising Indian economy and Volkswagen joining the bandwagon enroute India should see it producing better bottom-line numbers for the company and its investors.
