Andreas Hinrichs
CEO
Volkswagen de México
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View from the Top

Matching Right Vehicles to Desires of Mexican Market

Mon, 09/01/2014 - 10:00

Q: What is the difference between VW’s current production platform and its next generation platform, and what does this shift mean for your suppliers?

A: VW’s next generation platform allows for different cars to be built on the same platform. It allows for the same car components to be used on the Polo, the Golf, or other vehicles. This reduces the required investment levels, allows us to have closer cooperation with our suppliers, and means that we will be able to reduce the cost of parts. Suppliers play an active role in the development of parts, and the next generation allows for them to expand their business. A lot of parts require the participation of suppliers across the value chain, and the next step is to involve more suppliers lower down the value chain. If we do not have the right infrastructure to source parts here, we may need to get them from more expensive markets like Europe. Therefore, VW pushes suppliers to set up a strong foundation in Mexico. VW is not building up this production capacity on its own. The new plants of companies like Nissan and GM also help, as each step builds up supplier infrastructure. The announcement that Audi will build a new plant in Mexico is good news as it improves infrastructure.

Q: How much of VW’s research and development takes place in Mexico?

A: We have a development department which employs 900 people but we are planning to increase our development activities over the next three to four years. Mexico has a lot of potential, but progress must be made step by step so the whole country can grow. For example, India developed at a drastic pace but is now slowing down since not all industries were able to follow. Everybody is discussing R&D in Mexico but few are actively working on it. It would be more interesting for a country like Mexico to increase production and increase the number of people working in the industry. The first step for a market like Mexico is to have an industry capable of producing high volumes before moving on to develop a strong R&D capacity. A lot of countries are forgetting this first step.

Q: VW in Mexico is traditionally associated with the old Beetle. What is your future positioning strategy for the Mexican market? 

A: In the past, we supplied our customers with the right type of vehicle for Mexico: simple, robust, affordable, and with a low maintenance cost. The Beetle was so successful that it is still here. It was the best car for Mexico at that moment, but we now have to change since the country is changing. Mexican customers will no longer only accept cars that are affordable; they also look for the latest technology. In the future, they will look closely at a wider range of elements so VW’s philosophy has to be different from in the past. Customers must have a clear understanding about what they get from VW, whether from a car that costs US$10,000 or one that costs US$100,000. We have vehicles in Europe or the US markets that include a lot of advanced technological components but we also offer lower price vehicles that come with less technological components.

Q: What are the points that you will emphasize to the Mexican consumer in order to grow your market share?

A: Our target for 2018 is to be the number one car seller in Mexico. We will achieve this by bringing a greater variety of VW products to the country. SUVs are the main growing segment here so we need to have a locally produced SUV. At the moment, the new Vento is being made in India but we have to produce the next Vento in Puebla as it could well be the right car for Mexico right now. We are already producing a hybrid Jetta but it is more expensive than the ordinary version, so 99% of production currently goes to the US or Europe. That could also become a potential product for Mexico so we are analyzing the right time to sell hybrids in Mexico. One strong point for VW is the technology and the design of its cars. After three years, our design and technology still hold up and the vehicles fetch a good price. Our cars need to look good, have a high safety rating, and provide new technologies to our customers, which is why we are improving technology for hybrid and electric cars. By 2018, VW needs to reduce its energy consumption, waste production, and water and gas consumption by 25%. The use of renewable energies and other technologies is helping us reach our targets, which is good for the environment while also reducing our costs. When we speak about this to Mexican customers it helps us gain a positive image, but at the moment such initiatives will not help to sell cars in Mexico.