Dr Kerschbaumer, managing director, Volkswagen Group Singapore

By Andy Hum

DESPITE TOYOTA’S ANNOUNCEMENT that they would be withdrawing from Formula One, citing the need to focus on their own product – cars – the general market sentiment doesn’t seem so bad.

The Japanese giant car-maker announced on Thursday that it had a net profit of 21.8 billion yen (S$338 million) during the July-September quarter, after being in the red for three straight quarters. Still, it’s a sizeable 84 percent down from the same period last year, when they earned 139.8 billion yen ($2.17 billion).

Another Japanese car-giant, Honda, also posted a net profit of 54 billion yen (S$837 million) for the July-September quarter, which is 56 percent lower than the same period last year.

But it’s not just the market conditions. Both car-makers also blamed the strong yen for the drop in sales.

Further west, in Europe, more quarterly profits are being announced. Daimler, which produces Mercedes-Benz, announced a Q3 profit of 56 million Euros, down 72 percent from 216 million Euros the same period last year. Its rival, BMW, made 78 million Euros for its third quarter profit, which is about 74 percent lower than last year’s 298 million Euros.

One brand that industry analysts have been watching, though, is Volkswagen. The German company, which also owns brands like Audi, Skoda and Lamborghini, reported an 86 percent drop in its Q3 profit, compared to last year. Still, it’s a good 161 million Euros (S$334 million) of net profit for them. They’ve also increased their global market share

CarBuyer spoke to Volkswagen Singapore’s managing director, Dr Zeno Kerschbaumer, to find out where the future lies for the brand in Singapore.

CarBuyer: Despite the year’s economic situation, Volkswagen’s sales figures have been largely positive. Apart from the emerging markets, in your opinion, what other reasons have contributed to the brand’s performance given the downturn?

Dr Kerschbaumer: Although the world automobile market has contracted by 12 percent this year, Volkswagen has continued to record stable delivery levels, and is performing extremely well in the key markets of Germany and China, as well as Brazil. There has also been strong worldwide demand for mass-market models like the Golf and Tiguan.

This shows that Volkswagen’s product strategy is on the right track. By focusing on technologies that add real value to all our models, such as our TSI petrol engines, TDI diesel engines and DSG transmissions, we have shown customers that they can buy cars which are fun to drive and extremely fuel efficient at the same time. Not to mention environmentally friendly with low CO2 emissions. These cars are a perfect fit for the current economic climate.

CB: How has the market share for Volkswagen in Singapore fluctuated since the beginning of 2009?

DZK: Our market share has been increasing steadily throughout the course of this year, especially following the launch of key new models like the Golf, Scirocco and Jetta, all equipped with our latest technologies like TSI and DSG. The customer response to these cars has been fantastic.

Over the first three quarters of 2009, Volkswagen’s share of the passenger car market in Singapore was 3.4 percent, up from 1.3 percent in 2008. In September 2009 alone, we had a 6.4 percent market share.

CB: Will Volkswagen in Singapore stay in its current market position, or are there plans to move it further upmarket, or even lower to accommodate the lower market segment?

DZK: When Volkswagen started its direct dealership in Singapore in 2007, we set the goals of having more competitive pricing and being closer to our customers. We have achieved both these objectives, and now it’s the customers who will decide if they want to upgrade to a Volkswagen. It’s clear that many already have.

Our cars may command a small price premium over the direct competition, but when customers look at the design, the TSI and DSG technologies, the standard of safety and of course the strong resale value, I believe they will see the true value for money that we are offering.

The new Polo, for instance, sets new standards in the compact car segment and it’s a perfect entry model to the Volkswagen range.

CB: Given the upcoming changes to the COE quota, how do you think that will affect the type of cars sold (by segment type) in Singapore, and how will that affect Volkswagen’s pricing?

DZK: Our current pricing strategy of offering exceptional value for money will not change, and price fluctuations will be determined mainly by the COE premiums. Apart from COE quotas and premiums, I believe that the state of the economy and consumers’ spending abilities are also decisive in determining the type of cars sold.

If COE premiums rise, car buyers will start to make more discerning choices. They will be more particular in getting the most for their money in terms of technology and product quality within the respective segment.