In conversation with Thierry Lespiaucq

It’s no secret that Volkswagen haven’t had it easy as far as their Indian innings is concerned. Did they read the market wrong? Maybe. Were the products overpriced and under equipped? Yes. And high taxes threw Porsche’s business plan out of whack. Of course there have been bright spots for the VW Group, Audi being a particularly bright star, but all the problems recently got exacerbated with the dieselgate scandal. It’s not an easy time then to take charge of the sales operation for the entire Volkswagen Group in India but Thierry Lespiaucq isn’t your regular car company MD. evo India readers will be thrilled to know he’s one of us – an enthusiast, and not just any enthusiast but a hardcore biker who doesn’t shy away from regular rides in Mumbai where he’s based. So rather than spend an hour with him in the office, we got hold of two Ducatis (he loves the Multistrada!) and went out for a ride. After which we got down to serious business.

SC: It hasn’t been an easy year for the Group, has it?
TL: No, it has not been. But as we all say internally, with every problem comes an opportunity. And the group is okay as far as the problem is concerned. Everything is not completely fixed but we are on the right track. We have also defined a new strategy for the Group (internationally) which has been to accelerate e-mobility including self-driving and electric.

SC: India is far away from such technologies.
TL: To have this e-mobility in place we have to develop charging stations, you must be able to go to office, charge your car and come back to your house. What is possible in India very quickly is a hybrid. Hybrid solution can be implemented almost immediately, especially plug-in hybrids as they can switch to the conventional engine when required. It might require incentives. Passat (GTE) would be the perfect car and yes, it is coming to India.

SC: The Group’s plan for the next 5 years
TL: I would talk initially about bringing new products, because volume is the biggest advantage. So the focus is on extending the range of products in the market. And we are working extensively on the concept of the future motor (engine) range for India. The brand on which our focus is today has to be VW.

SC: The sub-4 metre segment
TL: We are still waiting for the final GST rate, what will be the rate of the sub-4metre, will it be different from the larger cars, if yes then the sub-4 metre concept will continue. If not, it might change the game, but not fundamentally. I think the development of sub-4 metre has been far beyond just the tax incentives and a drastic change in taxation would probably not create a drastic switch. Yes at a same price would you take an Ameo or a Vento? I would have answered yes, you go for a Vento 1.5 years ago, but today I’m a bit more conscious. I think this size fits the traffic conditions well. A sub-4 metre SUV too is a good concept, it is decent in the traffic. I think there will be a future for that.

SC: Taxation after GST
TL: We should get a clarification on various types of taxation dependent on the sizes of cars, it is really impacting the mix of models that you have to propose into the market. If we go for a higher taxation on the large cars, including the CBUs, we should be told (in advance). If you know that let’s say, April 2017, you are going to pay 7-8 per cent more for your car, you’ll buy it before, obviously. So, we need to know that, because we need to supply the cars, we need to prepare all this. We need a minimum of 6-7 months in advance. We cannot shift production from one day to the other, we have commitments with suppliers.

SC: On the diesel ban in NCR
TL: When NCR gets a cold, everyone gets sick. Now we have a decision from the NGT and this (green) tax part. We have seen a switch to petrol, clearly, but on the other hand we are still selling (diesel) Cayennes, as many as before. We are still completely blind. We need clear decisions. So either we push in electric or hybrid, or we say diesel has its role in the environment, because it emits lesser gasses. The switch from diesel is more than 10 per cent, the total reduction in sales.
Now the 10-year ban (on cars older than ten years), what does it mean? You buy a car and you keep it for 5 years, and what will be the behaviour of the used car buyer taking a 5-year old car, knowing after 5 years it has to be scrapped. This rule should apply to certain type of models, not all. And tomorrow we put Euro 6 cars on road, after 10 years the cars will be fine. So the ban should be lifted. Today, honestly speaking, we are lacking visibility in the long term.

SC: Has VW been too slow to understand the Indian market?
TL: VW Group (internationally) is centred around products which are non-existent in India. We didn’t have in the range, the platform; and the models which could fit immediately in the local market. We came late and it takes time obviously. We have an ‘A-00’ car which is the Up, but it is a product that would cost the same as a Polo. So India needs something different. Probably, a more affordable concept. We are slower because our brand comes from a different point so it will take time.

SC: The split with Suzuki, did that set you back?
TL: I cannot answer a yes. There was some development but initially the deal with Suzuki was also a win-win. Suzuki was looking for specific tech and we were looking for something different, it didn’t work out. I don’t say it slowed us down. We have platforms, we have everything but our cars have quality, are safe, and this costs money. And basically the Indian market requires cheap cars. We need to find a way to produce safe, high quality and cheap cars. It could’ve helped but we can do it differently.

SC: The Phaeton, Touareg, even Passat was withdrawn
TL: The decision was made, right or wrong, no comments. It was a decision to phase out the models. Whatever happens, we have to bring back the Passat which fits a segment where there isn’t much volume, but the Superb is there, A4 is there, BMW, Mercedes, big players are there, so VW has to be there. Touareg will come too, but again, as a niche product. We (VW Group) have Q5 that is slightly smaller, but we also have Q7, Macan, Cayenne, so bringing the Touareg to India would not bring much to the Group. And with this kind of volumes, the investment to bring an additional car into the country is difficult. The Passat, Beetle, Tiguan are products we need to have in India. And I expect maybe 5-6 years from now India will also become a market for cars like the Golf. Today it’s not on the agenda, but it will be.

SC: What about motorsport activities?
TL: When you talk about local activities, it’s always more difficult. The public is not following it so closely. We have these fans and performance addict(ed) people who like motorsports (but) it’s difficult to exploit on a large extent. It is directed to a group that reads magazines.
The brand has to make a decision where to allocate the money. We are working together with the factory on Vento Cup, but we cannot push everything and if we have to put more money on the launch of Ameo it’s a priority so we cannot do everything at the same time. But yeah, we are all born with a camshaft in the head, we are all car fans, car addicts. In my past assignments I have been involved in motorsports activities and I have sometimes stopped some local motorsport activities when it was really not worth it because if public was not following we need to stop.

SC: What is happening with dieselgate in India?
TL: We have started homologation of the software and systems since the beginning of December. We are still waiting for the last tests and we will start the recall soon. But there’s no issue and the software works well and yes, I’m eager to start now. We need to end this story and turn the page.

SC: Is the number 1 tag important, particularly for Audi?
TL: I will answer, no. Frankly speaking, running up to number 1 position, it’s a team target and we want it. But you also have product cycles and depending on the products life cycle, what is important is to run a strong brand. What is necessary is to strengthen the brand equity, and this is more important than being number one.

SC: How much lower in the price range can Audi go?
TL: We have discussed this internally, it doesn’t make sense. If you want something smaller than an Audi, you have the Polo. Going down won’t make much sense.

SC: Ducati is not under VW Group in India?
TL: Ducati is nowhere linked to Group division, they’ve their own structure. For the car brands we have a structure and we are providing the brands the necessary support in terms of HR, finance and guidance, if necessary. Ducati was always outside and it remains outside. The same as Bugatti. There is no connection with VW.

SC: Bentley?
TL: We can’t be everywhere. Sometimes you need local people to manage the business successfully. So Bentley is not under the responsibility of the NSC. It’s not an agenda in the short term, absolutely not.

SC: What happened with Porsche’s India business plan?
TL: I arrived mid-14 but it was one of my questions, yes. We took over responsibility of Porsche in 2012. There was a big change in taxation at that time. We reached 1000 cars. And then it has been reduced because of the taxation system. When you have 168 per cent of custom duties, it’s too much. You cannot develop a brand at such prices, it’s impossible. I think the performance of Porsche today – and we won’t disclose any figures – but the number of cars we sell is quite amazing when we look at the price of the car.
We are now going to introduce a new version of the Macan which would be more accessible because it will enter into a lower tax bracket, but we have to pray for this and the same story for the new Boxster and Cayman. Fortunately we have managed to get them below certain tax bracket which helps having a more competitive price.
If we could get some agreement like in some countries if you could import a certain percentage of your export volume (without tax) that is perfect. (For instance) we produce 500,000 cars a year (in India), we export 50,000 and we import some from outside. In Mexico 2 per cent of the local production, 50-60 thousand cars can be imported tax free, beyond this there’s tax. Implementing this (in India) can be really encouraging to produce locally, because it helps. This could be the measure that would help everybody and not only us.

SC: Are you okay with Lamborghini?
TL: Lamborghini is a top selling brand in this category. We talk about small number of cars which are around `3-5 crores. We have a very good relationship with the customers and the dealers. It works really well. The brand (Lamborghini) is stronger in India than any other sports car brand.

SC: At Le Mans who were you rooting for?
TL: It was Porsche. I am a strong fan of Porsche. I had vintage Porsche cars but unfortunately I had to sell them when I left my home country years ago. Since I was a child, I am a Porsche fan.

SC: Do you ride often in India?
TL: Yes, as much as I can. I am riding a Royal Enfield. In Mexico I was riding a Ducati. Considering the road safety and driving conditions it’s not so funny (safe) riding a motorcycle in India. You have to be very careful. We are lacking racing circuits. I would say riding on a track would completely change the game.

SC: Finally your India experience?
TL: Fantastic. It’s a kind of market where you learn a lot. It’s a fast growing market, it’s a market which requires a very specific product and we need to understand that. We must push now and not wait for the future. The potential for the next 5-10 years is immense. It’s a great country with a lot of potential. If we channel this energy, we will definitely have a bright future. L