Volkswagen targets 5% share of Middle East car market

Volkswagen could become the world's largest automaker by the end of this year, selling more than eight million vehicles. But Stefan Mecha, managing director of the German company's Middle East operations, is not one to be distracted by what the short term has in store, however weighty the result it yields. He has set his eyes firmly on VW achieving a five per cent share of the automotive market in the Middle East in the mid-term. Right now, he is rolling out a new model strategy that would help the German manufacturer move closer to its regional aspirations. "What we have seen is that VW is successful among the European brands, but these account for only six per cent of the entire auto market in the region," said Mecha. "This is why VW got interested in putting its feet on the ground here and thus taking a long-term perspective to developing market share. "While we have great heritage models that have done well — such as the Touareg — it's time for the new models to start pulling their weight." By the looks of it, the recently launched mid-sized Jetta is surely doing so. "We can't obviously build a customer base overnight, but what we have seen in the four months since the launch is that more Jettas were sold than in the same while last year," said Mecha. "This is a segment seeing a lot of volumes and the car is making its way." This will pave the way for VW to make its sharpest play yet in ramping up the regional numbers. By summer next will see the introduction of the Passat model made at the company's recently-opened plant in the US. While being more spac-ious than its European counterpart, the US version will also be strategically priced. "This car is spot-on for the markets here," said Mecha. What it will also provide is an entry into the region's corporate fleet market, a category that VW has not had much of a say in so far. "We are fully aware of the necessity to enter the fleet business as in some of the markets here these account for 50 per cent and more of the overall unit sales," said Mecha. "Our rent-a-car volumes are rather low — the new models will come and then we can start capitalising. Our fleet share will definitely increase, but finding a balance with sales to individual buyers is important." But couldn't VW try and get the shipments in before next summer? "The car was only launched in the US in September; first it has to cater to the domestic market before production is ramped up for new territories. "We will be one of the few overseas markets to get the model — and keep in mind that shipments from the US take time." Reintroducing the Polo Apart from the much-anticipated Passat launch, there will be the re-introduction of the Polo brand. "It gives us an entry model into the VW brand and that will bring in new customers," the regional head said. "That in turn allows us to accompany a VW customer over a lifetime of his model needs." In 2002 the earlier version was phased out. The new model will be shipped in from the plant in Russia. Having a network of manufacturing plants straddling the globe represents a huge bonus, according to Mecha. "This way we have an instrument to hedge against currency changes by shipping in models from dollar-denominated markets," he said. "Because you certainly can't explain to a customer why the price for a model is $100,000 (Dh367,310) and a few months later it's $120,000. We have a price commitment that is dollar-based." If all of these strategies yield the desired results, VW is in with a shout to capture a five per cent share of the Middle East auto market. Beyond that anything is possible. "Let's take it step by step, but what's needed now is a gradual improvement from the two per cent share we have," Mecha said. Power to the people's car Currently the world's third largest automaker behind Toyota and General Motors, Volkswagen could catapult to No 1 by selling more than eight million units by year-end. Toyota has had distractions from the March earthquake and tsunami and could also be impacted by the recent floods in Thailand, while GM is still picking up speed following its restructuring. "We still have two months to go to see whether we can finish the year as No 1," said Stefan Mecha, the regional head at VW. "In our strategy, which we have named Mach 18, our objective is to become the world's largest automaker by 2018, not just in sales volumes but on employee and, above all else, customer satisfaction. We will know next year what we have to work for."