Business

Indian racers rev up sales for Volkswagen

German punctuality was having a problem with Indian timekeeping.

The drivers of the Polo Cup, India's newest car championship, were supposed to be getting dressed, but their race jumpsuits had not turned up.

As the minutes ticked nearer to the starting time, the drivers sat about in their flame-retardant underwear and the organisers got a little fraught.

This was a big moment for the German carmaker Volkswagen.

'Lot of potential in India'

The stands were full, the race was being broadcast live on local TV, and the Polo Cup was a cornerstone of the company's business strategy in one of the world's fastest-growing car markets.

"For sure, there is a lot of potential in India for car manufacturers," Kris Nissen, the head of Volkswagen's motorsport division, had explained a day earlier while showing off the team's stripped-down and souped-up cars.

"We need to do a lot of activities to tell everybody that we are here, that the car is built here and produced here, and that it is a good car.

"There are a lot of ways to do this. You can do the classic marketing, the classic communication. Or you can use motorsport."

Polo push

Volkswagen is investing heavily in India. It has built a production plant in Pune, Maharashtra's second city that sits about 150 kilometers in-land from Mumbai.

The factory builds Polo cars, and will spearhead the company's push into India, a market it expects to double in size over the next five years.

Currently, about 50% of the Polo cars are built from locally sourced components. Volkswagen wants to increase that to as much as 70% and is building up a network of suppliers and producers to meet this demand.

It also wants to lift its share of the market to about 8%, from the 2% it currently has, and reckons that consumers need to see what its cars are capable of.

'Top down strategy'

That is why it has started the Polo Cup, a six-race championship that began in Pune and will then head down to the South Indian race tracks of Coimbatore and Chennai.

"When we started here the brand awareness was not at such as high level as it is now," says Joerg Mueller, the head of Volkswagen's Indian operations.

"We started with a top down strategy. We came with some higher positioned models to show to the market what Volkswagen stands for.

"This was very important in the beginning and we had to explain, and we still have to explain, to the customer what Volkswagen means."

High cost sport

The company will have its work cut out getting its message across. Motorsport, though growing in popularity, is still relatively new.

Volkswagen's motorsport chief Mr Nissen estimates that only about 300 drivers of all levels and ages are involved in racing across India. That compares with some 600 people in a country such as Denmark.

One of the limiting factors for drivers is the cost of taking part.

While Volkswagen provide all the 20 Polo Cup contestants with cars and mechanics, the drivers still need to find $5,000 of their own money, and that is before they have paid for any running repairs or crash damage.

'More of a sport than a business'

Get unlucky, push too hard, and the costs can soon add up.

Imran Majid is a 23-year-old who has the easy drawl of someone who is used to travelling through life at a breakneck speed.

A drag racer, he fancied testing himself on a circuit and entered the selection process for the Polo Cup. After weeks of testing, he made the final cut.

And while he is excited about his prospects in the first race of the season, he is more realistic about the economic pressures.

"It's more of a sport than a business right now. It's not yet gone to a business level," he says. In the background mechanics try to fix his smashed radiator and dented front left wing, the legacy of a racing run-in.

"Hopefully in the next five years it may turn into a business. We are looking for sponsors, but there are no sponsors around right now.

"If we didn't have the money, there'd be no game for sure."

Popularity of small cars

What Volkswagen and other carmakers are betting on is that access to money will become less of an issue not only for the racing drivers, but also for an increasing number of Indians.

The speed with which the economy is growing - gross domestic product is forecast to expand at about 8.5% this year - means that wages and consumer demand are also on the rise.

And unlike many other markets globally, Volkswagen estimates that some three quarters of all cars sold in India will be in the Polo class. Indians, it seems, prefer smaller cars to the larger gas guzzlers that have proved popular elsewhere.

Mass market appeal

The potential for growth in India means that for many car companies there is no other option but to come here.

Sales in the US and Western Europe remain under pressure. And with a population of almost 1.2 billion, even a 5% market share in India would give a company a consumer base that is roughly the size of the total UK population.

Back at the race track, the drivers' jumpsuits turned up in the nick of time and while there was a lot of sprinting to and from the cars, the championship started on schedule.

In the pits, there was a quick round of applause and a few smiles among the mechanics and company executives.

Then it was back to the serious business of running a race and building Volkswagen's brand in India, because as motorsport fans know there are potential problems lurking around every corner.

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