Volkswagen’s pipeline of cars for the Indian market will depend on how the existing tax structure on automobiles evolves. The company says it can get hatchbacks, EVs and hybrids to India but that will be contingent on how vehicles are taxed. The sub-four-metre tax rule has made India the world leader in small cars but automakers feel that it has also restricted the natural growth of the market as well as curbed export potential. In an interview with Moneycontrol, Gurpratap Boparai, Managing Director, Skoda Auto Volkswagen India, shared the company’s views on the India market. Edited excerpts.
The mid-size SUV segment, where the Taigun will be launched, is uncharted territory for Volkswagen in India. What are your thoughts on this?
We have not tried to enter that segment in India but we have the T-cross in that segment elsewhere in the world. The trend is in favour of SUVs in India and we have the expertise in that segment. The Taigun will pave the way for our entry into this segment.
What happens to the brands that introduced Volkswagen to India, such as the Polo and Vento?
Whatever models we launch in India will be on the MQBA0 platform (The new global VW platform that has been customised for India). This platform can also do a next-generation Polo … but whether it should be a hatchback or some other body style is something we are still evaluating. For the Polo to be sold in India, it has to be below 4 metres, which means we have to make changes here to the Polo launched globally.
What are your views on the taxation structure on cars in India?
Taxation based on the length of the car has outlived its purpose. This difference in taxation should gradually be phased out. (Read more on this here). It’s understandable that lots of investment has gone into building products that meet those body styles. Today the difference in cess on cars is very high, which should ideally come down.
Do all the companies agree on this?
There is a fair bit of unanimity that if there is a roadmap on reducing that differential, say, over the next five years, then it will be fair to everyone. But it really does not make sense to continue with this because it limits our export opportunities. Globally, sub-4-metre cars are just 7 percent of the pie and we cannot keep improving our expertise in such a small segment further.
Where do you see the sub 4-metre segment in 8-10 years?
Tiny cars still have their reason for existence, in providing affordable ownership. But the cost of making a 4-meter or a 4.2-metre car is almost the same. So, if for Rs 30,000 more, the customer gets a bigger car then he will go for that bigger car. Why should the customer not get more for his/her money?
How will Volkswagen approach retailing new-age products like the Taigun?
We have reduced the number of dealer-partners we operate with. There have been acquisitions of dealerships by dealers. We don’t have the kind of volumes to have 500-600 full-fledged dealerships. But by the end of this decade we might have to look at that. Currently we have around 102 dealerships.
When do you take a call on the future of the Polo/Vento?
We will take it in due course.
How do you manage two different platforms from one factory?
The lines are flexible enough but it also means that the workforce needs to be skilled enough. They have been handling a fair bit of complexity like left and right drive models, different powertrains. But yes, different platforms increase the complexity multi-fold.
Would electric cars be a part of the 3 percent market share target for India?
It will depend on how the market evolves. It will depend on how fast the EV segment grows in India. We need to have buyers in sufficient numbers. A good intermediate way would be to have an assembly operation and for that we need a proper roadmap of duties and taxation from the government. The more the number of players entering the market, the faster the infrastructure develops.
The amount of localisation on previous-generation cars such as the Polo was very poor. What has changed with the Taigun?
On-earlier generation cars such as the Polo, Vento and (Skoda) Rapid, even the transmission wasn’t assembled in India. We did assemble some engines here. With the Taigun, that’s a major step because even the engines are locally made.
Are you open to the idea of selling engines to others?
Yes, we are open to selling our engines.
What about hybrids for India?Electric and hybrids both require tax breaks. In today’s tax structure, the hybrid gets taxed more. To meet the CAFE (Corporate Average Fuel Economy) norms, you will have to see what works best for you. Hybrids could come, depending on what we need to meet the CAFÉ norms. (These norms will force automakers to improve fuel efficiency by 30 percent from 2022.)