By the end of 2013, we plan to have 90% of our products being produced locally. However, the Audi R8, Audi A8 and Audi A7, which are exclusive products and see a lot of customization requests, will continue to be sourced from Germany
In a candid conversation with Avisekh Agarwal and Dhruv Chadha, Michael talks about Audi’s growth strategy and its class leadership in India. Audi is aggressive on India and Michael seems hungry to reach the number one spot and that too pretty fast.
How has the Indian luxury car market evolved over the last 5-7 years? What have been the major changes that you have observed during this period?
Considering the current market scenario, which is not upbeat, Audi has been the driving force of the luxury car segment in India. Factors like rising fuel prices, depreciating rupee, changing registration taxes in various states, reduction in retail loans and speculation on higher duty on diesel cars, together have had a negative impact on the automobile industry.
However, having said that, the emergence of a more prosperous middle class which understands, values and aspires to own a luxury brand like ours, has significantly contributed to the transformation of the luxury landscape in India.
Apart from that, globalisation of the Indian economy has also added to the growth of the luxury car market in India. A luxury car besides being a status symbol is now also being viewed as an offering that has the merits of safety and convenience. People want to be driven better and in style, even in smaller towns like Agra, Chandigarh, Nagpur or Bhopal. There is an increasing demand for Audi from tier 2 and tier 3 cities which was not the case earlier.
The last few years have also witnessed an emergence of new a
ge and second-generation entrepreneurs who are taking the business to the next level. They are successful and have a latent hunger for luxury.
India is considered as a ‘land of paradoxes’ by many. What has been your single biggest challenge being at the helm of affairs at Audi India?
When I was made the head of Audi India, I was asked to change Audi’s profile from that of a niche SUV brand to that of a luxury car manufacturer. This in itself has been the most challenging and also most fruitful aspect.
We went back to the basics, took another look at the product portfolio, brought our dealers on board and communicated to them that it was time to shift gears. Products, dealer network, attention to detail and service were other parts of the puzzle that we managed to put together and it seems to have worked to our advantage.
How has Audi tried to differentiate its strategy from its closest competitors? Is having a price point higher than competition a sustainable strategy? To add to that, you have recently announced a price hike of around 5%.
We, as Audi, are a younger brand when compared to our core competitors in the Indian context. We could either go bottom up or top down in our approach. But when you want to establish a luxury brand, people look at your halo models. These are the models that help build an aspirational demand for potential customers.
Our strategy began with establishing our halo models which include the Audi A8, Audi Q7 and Audi R8 as the ultimate aspirations. These cars are the pinnacle of luxury. Customers, who start with our small cars such as the Audi A4 or even the Audi Q5 to a certain extent, also aspire to own our exclusive Audi R8 and Audi A8s.
So we follow the top-down strategy for India which is one of our key pillars for growth in the country: A8L, A7, A6, A4 / Q7, Q5, Q3.
A series of pioneering marketing initiatives have helped us establish a strong brand connect with our customers and reach out to a wider customer base. We have expanded our horizon and ventured into newer areas with music videos, strong brand channels, booking parties at our showrooms and large-scale customer-drive events. For instance the Audi Driving experience, Davos where Audi interacts with the winners and invites them to experience the luxury and technology of an Audi car. Such exercises create a strong connect with our brand enthusiasts. But the overall market scenario is indeed challenging. The rise in input cost, depreciating rupee as well as continuous increase in fuel prices have made us re-evaluate our pricing strategy in India and increase the prices of the entire range.
Audi represents class and aspiration and we do not want to lose either in the quest for numbers. For us, having a better product offering is more important than numbers. Our customers recognize the intrinsic value of our brand and are willing to pay for the features we are offering.
Audi is sprinting towards the number one spot. What are your expansion plans in 2013?
We would want to bring our cars to all the luxury aspirants, wherever they are. We have worked hard on our expansion strategy for the year 2012 with the launch of class-defining models and strengthening of our dealer network not only in metros, but also in tier II & tier III cities of India. This year, we opened dealerships in Raipur, Kanpur, Goa, Navi Mumbai, Delhi West, Coimbatore, Nagpur and Bhopal and we will continue on the same expansion strategy with plans for Lucknow, Noida, Mumbai South and Vadodara etc in the coming year
Audi has established itself as a leading luxury car brand in India and now your main focus is on driving volumes. Don’t you feel it’s high time to set up your own manufacturing facility in India to help you drive volumes?
We have a clear long-term strategy in the country with positive growth plans. We recently announced the local production of our second Q model, the Audi Q7 at the group plant Skoda Auto India Private Limited (SAIPL) in Aurangabad at a newly constructed hall.
We have firmly established ourselves as the leader in the luxury SUV segment with our Audi Q models, the Audi Q7, Audi Q5 and the Audi Q3. Local production of the Audi Q7 was part of our long-term growth strategy in India and looking at the growing demand from our customers for our Audi Q SUVs we have created an additional assembly line.
The Audi Q7 is the fourth model to be built in India after Audi A4, Audi A6 and Audi Q5 which will reduce the waiting time for our customers. By the end of 2013, we plan to have 90% of our products being produced locally. However, the Audi R8, Audi A8 and Audi A7, which are exclusive products and see a lot of customization requests, will continue to be sourced from Germany.
The Indian market is volatile, so we need to build a robust model strategy which allows us to define one or two product platforms that we can take to the next level. Also, we need to look at a model that will allow us to achieve serious production targets. Currently we are looking at our global models that can allow us an even higher and faster scaling up of our production capabilities in India. But that is something we haven’t made a decision on and are still analyzing the situation.
It is not uncommon for luxury brands to have Brand Ambassadors; BMW has recently signed up with Sachin Tendulkar. Audi, on the other hand has several strong brand advocates but no formal brand ambassador in India. Any specific reason for this?
Strong brands do not need brand ambassadors. Our cars and our loyal customers speak for the brand. We have a good connect with Bollywood celebrities who love our cars and the status associated with it. We also have sportsmen and young entrepreneurs who are brand advocates of Audi, so at Audi, having a brand ambassador is not really a need.
You have spent a fair bit of time in India now and have been leading Audi well. What advice would you give to expat CEOs trying to head businesses in India? What should they expect and what should they not?
After having spent more than five years in two different stints and at two different locations, I think the best way to come to India is to not expect anything.
The best advice I could give to expats is that they should absorb everything about India; they can read about the country if they want to, but they should start expecting only when they are here. The key is to look at India always as a glass that is half full and not half empty.
How do you deal with your requirements of human capital? Is quality talent readily available to you?
Infusing skilled talent at three levels: corporate, dealership and production is crucial to us. We strongly believe that a competent workforce that exhibits and fosters Audi’s brand values (progressive, sporty and sophisticated), is one of the strong pillars for Audi’s growth in India
For our dealer partners we identify ‘local heroes’ who have a strong network in the respective regions and also the urge to be winners.
What is your definition of ‘leadership’? What culture does Audi India follow and what is your management style?
I adopt an open door policy with my team at work. It creates a healthy culture at office and encourages ideas and participation from everyone in the team while giving them an opportunity to lead and drive strategies into tangible action fields.
I think the key essence is to synchronize every one on one vision and ask them what it will take to be No 1. The idea is to then orchestrate that vision down the value chain to everyone at the workplace and every employee on the shop floor.
Also, the youth these days play an important role in every organization which is also the case with Audi India. We encourage young employees to be a part of our team and grow with us.