We plan to sell 1000 cars by 2012
Axel Oberdiek, Manager CKD Projects and Project Planning, was in Kathmandu to launch Skoda Laura, claimed to be ‘the European diesel-engine car’ which is equipped with TDi technology to ensure fuel efficiency and environment friendliness. He shared his opinion on the Nepali car market and the close battle between petrol and diesel cars. Excerpts from an interview:
Do you employ country-specific technological modification and promotional activities for Skoda?
Skoda is the daughter company of Volkswagen Group and we sell cars in 105 countries around the world. We have one clear statement: the same quality worldwide. The Skoda cars that we sell in Germany or the USA have the same quality that we sell here in Nepal.
But given the fuel condition here, don’t you feel the need to embed special components, like double filtration caps, for this specific market?
Before launching our brands here, we had conducted a research to check on fuel condition, road safety and other related factors. One Skoda model was brought here and test driven for 30,000 kilometres using the local fuel. We found out that the models that we have launched here and looking forward to launch are perfect to local fuel, road and traffic conditions. We have introduced the models that are tested in India as we find India and Nepal closer at such parameters to some extent – like driving conditions and road infrastructure.
Do you find Nepali consumers as brand-savvy to go for premier European car brands as Volkswagen and Skoda?
Volkswagen is the brand for people – the word itself translates into ‘people’s car’ in German. We haven’t defined our customers as rich and poor. Skoda has the sitting of a family car. Customer preference is obviously different in different countries due to the difference in their income levels. An ordinary family in Europe can easily buy a car that can be termed expensive in Asian standards. The market for family cars is big in India and so seems to be the case with Nepal. But India is a relatively larger market and almost 80 percent of the market is dominated by small cars, like Maruti 800, Zen, Matiz and others. The scope of medium cars like Honda City or Skoda Octavia is not that big. The current financial downturn has made the market slid down further.
Do you see Tata Nano as a serious threat in India then?
Of course, Tata Nano is the right car for the Indian customers because millions of motorbike drivers are maybe tempted to buy it. But after four weeks of launching the car in the market, customers are sending out mixed reactions. The company had expected an order of 100,000 within the four weeks but it received below 40,000. The ongoing financial crisis might have eroded customer confidence but I think Nano is the right car for Indians. I think it just came a year later than it should have been. Had it been launched last year, it would be a great success. We also have plans to launch a cheaper and smaller version of Octavia model in 2011.
Small and compact cars have started to dominate the four-wheeler market the world over. Does this mean that the bigger cars will vanish?
In Nepal, things will change a lot in the next ten years in terms of car market. We have bigger B and D market here, like we have Octavia. We plan to sell 150 cars in Nepal this year, including Fabia, and look forward to sell 1000 cars till 2012. But to bring cars here turns out to be expensive due to import duties that add another 0.3-0.4 million on each car for customers. That sounds crazy to me. I think the government needs to revisit those policies. And I hope once the political stalemate gets over here, business environment will be easier. There is enough room for optimism because we can’t compare the Nepali political situation with that of Pakistan, Afghanistan or Iraq.
How has been the impact of global financial crisis on Volkswagen Group?
It has affected Volkswagen of course. Our most recent financial statement stated that the sales figure of last year combined with that of the first quarter of 2009 showed that we lost a lot of money – almost 12 percent on sales. This is still better because when the total automobile market was going down, we interestingly increased our market share worldwide up to 11-14 percent. It is not difficult for us to sell cars as we put a lot of money into promotion and offer the importers financial incentives according to their sales figures and even give them money to carry out unconventional sales activities.
There is so much talk about alternative fuels and future cars. Are you planning to get into that part of business as well?
Yes, we have now LPGand CNG engine cars in the market. We are also planning to bring about 4-5 models of hybrid cars. The pressing concern for all the automobile manufacturers is to build high efficiency but low emission cars. I think the European carmakers are doing it late while the Japanese brands like Honda and Toyota are way ahead in developing such technologies and putting them in places. But these alternate fuel cars are way too expensive for general customers even in Europe.
How is the market race between diesel cars and petrol cars in Europe and in Asia?
People around the world have shifted from spending their money to saving it. And they are looking out for cars that consume less fuel. The common perception is like, “How many kilometres can I drive with one litre?”. One reason of our success in the Indian sub-continent is that 90 percent of our sales volume belongs to our brands Laura, Octavia and Superb which have diesel engines. When we started our operation in India in 2001, 99 percent cars that used to ply on the streets had petrol engines. When we decided to start with TDi (Turbocharged Direct Injection) engines, we met with remarks like, “Are you crazy? Diesel cars, here?” People thought diesel cars would flop in India. But after two years, following an extensive marketing and promotional drive, people came to realise the fuel efficiency of diesel cars. We were the first to sell diesel cars in India. Now there are many diesel cars – from Toyota, Suzuki, Tata and other players. The market share of diesel engine cars has now spiked up more than 25 percent in India against the share of 98-99 percent petrol engine cars in 2001.
But all the car manufacturers in Europe have also diversified into petrol engines. We call them modern petrol engines because they employ diverse injections like TSi (Turbo Super Injection). The fuel consumption by these modified petrol engines is also very low, in fact getting closer and closer to diesel cars. This has also changed the situation in Europe. The market share of diesel cars that used to be more than 40 percent a few years ago has now come down to 20 percent. It’s because the diesel cars are more expensive than petrol cars and the consumers are shifting towards the latter. But in India, the price of a diesel car is almost the same as a petrol car. There is only one benefit to a petrol car – more output and power as compared to a diesel car. That’s the reason why people in India and Nepal seem to prefer petrol cars.
What are you expectations from the Nepali market?
I want customers to believe that Skoda is a high quality car in acceptable price. I want them to be satisfied. We have a good local partner in Morang Auto Works having around 20 dealers across the nation.
We don't see any competition as of now ’
P.N. Shah, Executive Vice President of India's automobile-to-IT major Mahindra and Mahindra Ltd. was recently in Kathmandu to launch the company's new car Mahindra Xylo in Nepal. He shared with NBA about the comprehensive research carried out by the company prior to the production of the car. Excerpts:
What makes XYLO distinct and who are its potential customers?
Xylo is a product developed keeping the latent desire of the customers in mind. What I mean by latent desire is that at times customers can’t describe what features they want in their vehicles but express them in an informal conversation. We conducted an extensive customer survey across the world and extracted their common desire to include all the desirable features apart from the space that we have provided. I think we have optimized the available internal space, thus enabling it to accommodate seven to eight people depending upon the available options.
Basically, Xylo’s design is parallel to the latest style statement while it also looks robust. Customers who prefer multi-utility vehicle are its potential customers. It offers all the comforts of Sedan and much better status than it with its ample space and fuel efficient feature. We don’t intend to say that this vehicle is meant for this or that people. How we will be promoting it is by getting people on its driving seat and letting them experience its ride. This will automatically make customers familiar with its extra features. I think our product will address the various segments of the car utility—be it personal drive, group travel, family drive, luxury corporate drive or top-end tourists travel because it features such provisions as storing and individual air condition control. I think over a period of time, it will get furnished with further features.
It is said that this vehicle is developed after an extensive research. Can you shed light upon this research?
We came to understand about the varying needs of the customers from the research which ranged from ownership pride that customers attain after owning a car to utility of the vehicle to extra features they aspire for. Also, they wanted their car to reflect latest style because cars are status-symbol and reflect individual’s character. At the same time, we felt that those who responded to the survey were young, yuppie and people who are in growing stage of their lives wanting to possess an affordable and luxurious vehicle. We felt that this young aspiration certainly desires for space. This is what we learnt from the research.
For all this, we went to the market to pull together the concept concerning their desire and went back to our place of work. We then returned to the market with various models of the cars conceptualised on drawing boards to confirm that the models drawn on the boards met their requirements. That was how we carried out the research.
So do you think that you have put in most of the customers’ requirements in your car?
It is always difficult to attain that but I believe we have succeeded to capture most of the customers’ specific requirements in our product. Actually, the survey widened our understanding of the market and the customers. After the survey, we talked with the target customers in their own language to know about the features that delight them. We listed the collected desired features into three different categories viz. ‘must have’, ‘nice to have’ and ‘can’t afford’. These categories were developed to ensure that the available options well suit the customers’ affordability. We then prioritised the category which yielded the most benefits.
In product development process, a manufacturer assesses ‘rational, functional and emotional’ aspects of the product. In short, it is called ‘Refine’ process. In ‘Rational’ assessment, rationality of the product is studied like comfort level of the car and whether the seats available in a car are in proportion to the car’s size or not. ‘Functional’ assessment stands for meeting the minimum functionality of the car like safety standards, emission standards and inclination of the seats. ‘Emotional’ aspect implies the sense of emotional attachment that one establishes with the product while interacting with it - like user friendliness feature of the product. We concentrated in ‘Emotional’ aspect while conceptualising Xylo. This is how we have mapped various needs of the customers.
What is your impression of the Nepali market in regard to Xylo?
Actually, I don’t want to dictate the specific numbers of vehicle that I wanted to make. We want people to touch and feel Xylo and define the experience after they test-drive it. Thereafter, if this market still feels that the vehicle is over-designed or built-in with insufficient applications, we won’t mind looking at that. As we understand, we don’t see any other competition as of now in the segment where we are going to offer this product. We have priced the product very competitively. Thus people will be able to try and decide about the appropriateness of the product. We also have to reckon the price difference caused due to the taxation system here.
How have you planned to market your vehicle here?
We have different levels of marketing. As Nepal is highly exposed to Indian media—be it the print media or electronic media, any investment or any of our activity in India travels to Nepal quickly, simultaneously and seamlessly. So, as and when we develop any of the commercial advertisements, we always keep in our mind the markets which are India localised and which have an easy and seamless access to our media. Added to that, we have not set any fixed terms with our distributors and importers in this regard. We work on an open understanding. We together with the distributors and the dealers work with combined effort to invent tactical ads which are attractive not only to local market but are directly attracting the entire segment on which we want to deliver.
So far, as Mahindra brand is concerned, I think the Agni Incorporated Pvt. Ltd. (the distributor of Mahindra vehicles in Nepal) is doing good job. They provide all the required services with their service stations. Together with them, we are committed to spend the required time, resources and money in terms of advertising and after-sales support for the success of the product.
At the moment, there is a heavy power outage in Nepal which will surely affect your electronic marketing efforts like TVCs. How do you plan to relay your Indian TVCs here in Nepal?
I am fully aware of that. In fact even radio is suffering from it. With all this, I think the use of print media will increase now. Concerning the relay of TVCs, though it is going to be impacted, it will get relayed to the Nepali market but within the available types. We feel that the media channels operating in Nepal will surely retune themselves until the 16 hour power cut comes down to a reasonable level.
