Luxury car market will see positive light in 2021: Audi India

In the wake of the increasing number of Coronavirus cases in the country, German luxury carmaker Audi said that it expects sales to revive towards the end of this year around the festive season. The company recently announced online sales and service initiative for the Indian market so that its customers can book vehicles from their homes as the lockdown continues. In an interview with Fortune India, Balbir Singh Dhillon, head, Audi India, spoke about the uncertainty in the auto sector, the company’s future-looking perspective and his assessment of the COVID-19 crisis.

Edited excerpts:

You have announced the new Audi A3 sedan. Will the current crisis lead to a delay in new launches in any way?

The second-generation A3 Sedan was showcased globally on April 21, 2020, and we are in the process of identifying this and other such global products for India. Our India launch plan of new models for 2020 include a mix of volume and performance models. Having said that, we are in a dynamic phase at present and it is impossible to predict when normalcy will return. We will assess how the situation unfolds in the coming weeks/month to decide on the way forward for our launch timelines.

The pre-owned or used cars is an important segment for a luxury car in India. Are you planning to push for that instead of new launches for the time being?

We have seen strong demand for pre-owned cars. The pre-owned cars business helps us target entry-level customers who wouldn’t otherwise look at owning a luxury car as yet. We try to give them an Audi experience ahead of them buying a new Audi car and keep them associated with the brand. In 2019, our pre-owned car business – Audi Approved Plus registered growth of 11% and we expect this momentum to continue in 2020 and beyond. Having said that, we will also bring new cars to the country. For 2020 our launch plan includes a mix of RS and volume models for India.

When do you see a revival in the auto industry, especially in the luxury segment? The automotive industry has been reeling under stress for almost two years owing to demand depletion and liquidity crunch; Q1, 2020 came with additional challenges of BS-IV stock liquidation and later COVID-19. The year ahead looks rather challenging and we will anticipate strong headwinds in the next few quarters. Q1 of 2020 has seen de-growth and we expect it to continue through the year. We anticipate the luxury car market will see some positive light in 2021, but this will also depend on the complete extent of COVID-19 and its impact as we move ahead.

SIAM estimates that the automobile industry is losing ₹2,300 crore every day due to closure of production. How are you coping with the losses now that the production is shut for weeks?

We are part of a global value chain; any impact on this supply chain will sooner or later impact our business. The situation that we are all currently facing is rather dynamic as none of us have seen something like this in our lifetimes. While we can say that there has been no major impact for us so far, we can’t predict how the situation will unfold in the coming weeks/months. We are preparing various scenarios and tweaking our short term plans for India. From a long-term perspective, we have defined ‘Strategy 2025’ for India which focuses on four key pillars: 1) Customer Centricity 2) Products 3) Network 4) Digitalization. We are currently engaging at all levels so that we can support and sail through this phase. We have undertaken several initiatives to ensure that our dealers are secured and their immediate requirements are met in terms of liquidity. Not only sustainability, but we are also working with our dealers on various initiatives like readiness to re-start the business, protocols related to disinfection of facilities/cars, workforce safety/motivation, effective inventory management, quality of sales, and future investments. Additionally, we have undertaken a combination of actions to deliver and sustain the business, during tough times and in the recovery phase; these include a frugal business approach, strengthening the business ecosystem, effective use of resources and focus on profitability and liquidity.

In terms of supply chains and manufacturing, how will things change for the industry once things get back to normal? What will the post-COVID world look like for the auto sector?

There are multiple learnings which the industry can use. 1) Go digital: I firmly believe that in the connected world, many aspects of businesses have to go digital. While aspects like production/aftersales do require a plant/workshop set-up and personnel, I feel that a large part of the office and retail work can and should go digital. Our strategic focus on digitalization has held us in good stead in the current times. 2) Strengthen the eco-system: A business is made up of multiple stakeholders including employees, business partners, and suppliers. The COVID-19 situation has shown us that it is important to strengthen the entire ecosystem and see that all stakeholders derive strength from each other. All the partners should be able to support each other during challenging times. All of us are interdependent on each other and this chain must be preserved. 3) Focus on productivity: Whether it is financial or human resources, it's time to increase the productivity of each asset at hand. In the post-COVID world, the focus would be on the accomplishment of a task rather than a number of meetings or the hours logged in. Similarly, each financial resource must be put into its most effective use. 4) Expand the business horizon: At the end of the day, each business works for profitability. In difficult times like this, we clearly focus on the profitability and liquidity of the entire ecosystem. We look at newer avenues to expand our reach and include allied businesses in our portfolio. 5) Cost rationalization: In times like this, one has to look inwards. It is very important in our business that we shed the burden that we can live without; here I am only talking about expenses, not people. A pragmatic approach is very important and one has to clearly distinguish between what is "a must" and the rest.

As a company, how are you contributing to helping contain the spread of the virus and the relief work?

Audi globally has donated 5 million euros in the fight against COVID-19. Various support activities are being conducted by various countries. In India, our group, ŠKODA AUTO Volkswagen India Private Limited (ŠAVWIPL) has pledged financial aid of ₹1 crore towards setting up a dedicated COVID-19 facility with 1,100 beds with the Sassoon General Hospital in Pune. The contribution is made towards essential medical consumables and critical care equipment for the medical team and patients fighting the COVID-19. ŠAVWIPL has also donated over 35,000 sanitizers to hospitals in Pune, Aurangabad, and Mumbai and distributed over 50,000 food packets in the Aurangabad region. In addition, ŠAVWIPL is also making personal protective equipment like Automated AMBU Bags, Protective Face Shields, Intubation Boxes and Filtered Masks for front line doctors and medical staff.