The Pune plant built its 300,000th car in August 2013

The Pune plant built its 300,000th car in August 2013

Volkswagen is rethinking its strategy in India after failing to impose itself following a big splash market entry five years ago.

The carmaker planned a major challenge to market leader Maruti Suzuki. But lack of new models and an inability to price vehicles competitively pushed it to the fringes.

It has now altered its strategy, tweaking production, localising parts and concentrating on branding, sales and services. New models will also be introduced over the next few years.

The factory in Chakan near Pune, set up to serve the domestic market, is being turned into a major exports hub with every second car earmarked for export to one of over 30 countries.

VW’s biggest challenge has been to lower costs to compete with Indian carmakers and it is investing in a new engine assembly plant and a gearbox factory with the aim of achieving 90% 'localisation'.

Mahesh Kodumudi, the VW Group’s chief representative and managing director of VW India, said the country is expected to become the third largest passenger car market in the world by 2020. VW has targeted 200,000 units a year from Chakan by 2017-18, up from 100,000 now.

Kodumudi added India was one of the most discussed countries at VW headquarters in Germany.

"India is a very difficult market, it takes some soaking period. The company has learnt a lot in the past few years. India will be one of the strategic markets for us to support our global ambitions."

He told reporters focus had shifted from volumes and market share in 2011-12 to getting fundamentals right and creating a profitable business in India. The company has already started work to correct the cost structure and improve customer relations which meant holding back on new product introductions, the benefits of which will be seen in the coming few years.

"We want to nurture and build the VW brand, rather than blindly go after volumes," Kodumudi said. The company is launching the facelifted Polo in July and this will be followed by a minor facelift of the Vento.

The company will also reintroduce the Beetle while the Tiguan is under consideration. That is likely to be followed by a sub-four metre sedan [essential to fit inside a specific local vehicle vehicle tax category - ed] internally known as the 'Polo Stuffe' and a compact SUV in 2016-2017.

Kodumudi said the economic slowdown, which started in India in 2011, meant the company had to look at exports to remain viable. It shipped 25,000 cars in 2013 and intends to more than double that number this year with 55,000-60,000 units planned. A large number will go to Mexico, where the Indian made Vento is in huge demand. The company is planning to add more markets in South America and south east Asia.