Gurpratap Boparai, Skoda Auto India MD and VW Group India Head, speaks to us on his immediate priority after taking charge of VW Group India: raising profitability, improving service quality perception and reducing cost of ownership.
Leading the VW Group is a big task and a challenge. So what is your immediate priority?
We have a platform for India that will be localised here and that’s the immediate priority as far as the products are concerned. The other priority is to maximise the synergy between our various entities here, become far more integrated and have a common strategy for the group as a whole.
Typically, the VW Group has had a pretty high cost structure. Do you think that’s something that you need to focus on to be profitable?
Definitely some change in not just our business model but also our philosophy is required. So we will have certain standards for India that are different from today even as we retain the basic DNA of our products – which means they should be fun to drive, ride and handle well, be safe and high-tech. We are cutting out all unnecessary expenses and working on cost structures with an aim to introduce models that are improved but also competitively priced at the same time. Thus, the customer gets more value and we, at the same time, also make a bit of a profit. Skoda has proved that it can come up with cost-effective solutions and that’s why it was entrusted with development for the group. Besides, having a low cost structure is very important. For instance, if you have a component that is supposed to withstand -16 degrees, it’s not really relevant in India. Therefore, we are tailoring to our requirements
Will localisation be one of the key pillars for products that are competitively priced and tailored for this market?
That absolutely is the priority for us. Tailoring of some of the standards for this market and to make sure we can maximise the localisation. So if there is a certain process of making a part that is not present in India, we adapt to whatever is available, without compromising on the final spec of the product. This, obviously, will allow us to localise much more. Our aim is to have up to 95 percent localisation on the vehicle and much more on the engines than there is today. We also plan to rationalise the powertrain offering across the Group, depending on the size of the car. This will give us the scale required to effectively localise them.
What’s the way forward with diesels given that tougher emissions norms will make them less competitive going forward?
Today, with the available technology, diesels are almost as clean as petrols with a far lower CO2 emission. So there will be segments where even with all those higher level of technologies, diesel could still be relevant and there will be segments where diesel becomes a little too expensive. So it will be a mix. And together with CNG, hybrids and EVs, there has to be a mix to address the needs of the market as well as regulatory requirements going forward. While the direction is clearly to move away from fossil fuels, fossil fuels should also move away from generating energy for EVs because otherwise, we wouldn’t achieve much.
Could you elaborate on the engineering and product development work in India? Will you move to a time when even mild refreshes and certain components will be developed in India and you don’t need any input from the HQ?
That is the aim, so we will increase our engineering capability for this project (India 2.0). While it’s too soon to completely develop everything here, we have made a start. So while many of the parts and the basic platform gets developed in Mladá Boleslav (HQ), many elements of the ‘top-hats’ are getting developed here. The local engineering will not only give us a cost advantage, but also a closer ear to the ground. So we can respond faster to specific requirements.
There’s still a perception that the group is behind the curve in terms of service quality and the overall cost of ownership is quite high. Is that an area of focus?
In the intervening time, until the new products come (as part of India 2.0 project), service is top priority for us. A lot of work has already happened in the recent months and also the last couple of years, but we are not where we need to be even on the ground. But we are getting there. Not just Skoda but even the VW Group is putting a lot more focus on aftersales and on helping the brands’ address technical issues in the field more quickly. We have accelerated some of our aftersales processes and warranty procedures and are looking at how effectively we can address the complaints dealers are unable to resolve.
While the perception of high cost of ownership is largely correct, a lot of work has already been
done. For instance, the cost of ownership for the Rapid, Vento or Polo is now competitive. I think some of our users are already seeing the service bills come down, even for the regular service. Work has already started to localise our parts and components, and, on an average, we have brought down our cost of ownership by 10-12 percent. For some models, the cost has reduced by as much as 25 percent.
Even once the India 2.0 project takes off, you won’t have volume products as such with focus remaining on SUVs. Is scale still an issue? How will you deal with it?
Scale is always an issue but I think with the 2.0 project, we at least have the platform on which we’ll start with four products and then add more. That way, the scale for the platform exists and then we have to think about individual models as well. But you have to walk the line between parts commonality and product differentiation very carefully. So our new products will be far more differentiated than the Rapid and the Vento.
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