Volkswagen Passenger Cars Malaysia (VPCM) took over distribution of Volkswagen vehicles in Malaysia in September 2016. In the year that VPCM took over, sales of the brand fell by 5.6% from the 2015 volume but it was only in business for 4 months in 2016. So 2017 was the first full year for the subsidiary of Porsche Holdings Salzburg which is a wholly-owned subsidiary of Volkswagen AG. PHS operates in 26 markets around the world and in Europe, it is the largest and most successful automotive distributor.
The experience in the retail business that PHS possesses was one reason why it was given the task of selling Volkswagens in Malaysia (through VPCM). It has people who are focussed on selling rather than being distracted by manufacturing activities. Therefore, the expectation was that the sales volume would move back up after a full year of business, and today, VPCM reported an increase of 8.1% in the number of vehicles sold, compared to 2016. A total of 6,536 units were sold (of which 94.5% were assembled locally) and by its estimation, it should have a 1.3% share of the overall market, which would be a slight improvement over the share in 2016 which was 1.04%. The actual data for the Total Industry Volume (TIV) will be released tomorrow by the Malaysian Automotive Association.
While there was only one all-new model launched in 2017 (the Tiguan) to generate increased interest in the brand, much of the improvement came from serious efforts to win back customers and improve the brand image. VPCM executives don’t avoid talking about the infamous ‘DSG’ issue which had an effect on the brand and stress that the technical problems were resolved some time back. Service centres have been carrying out significantly fewer repairs on transmissions but there remains a segment of the public that is not convinced or still not aware.
To address this, VPCM will have Tech Tours and VW Fests where they can get the message across. They have also been engaging the car clubs to keep owners informed and to respond to issues more pro-actively, something which owners felt was lacking in the past.
The customer experience at dealerships also improved in 2017, according to studies which VPCM commissioned and this improvement was supported by the independent Customer Satisfaction Index (CSI) for Malaysia by JD Power which ranked Volkswagen in No. 5 position, a notable promotion from being No. 10 the year before.
“We also saw that the Net Sentiment – as measured on social media – became more positive during 2017, increasing towards the end of the year and higher than 12 months earlier. That pleases us but we still want to work harder to regain trust and also give a truly ‘5-star experience’ to our owners and customers,” said Erik Winter, Managing Director of VPCM.
With 2018 starting, VPCM is aiming to use the momentum from 2017 to grow sales. Mr. Winter declined to say what target has been set for this year but seems to see an 8% increase in volume as qualifying as ‘sustainable growth’.
To continue to be successful in 2018, VPCM will introduce new models and one of them will be the mid-cycle Golf (referred to as ‘Golf 7.5’). This will be available in a number of variants, including the R-Line, R and of course, the GTI. Although the plant in Pekan, Pahang, is already set up to assemble models using the flexible MQB platform (the Tiguan being the first), Mr. Winter said that there are no plans to assemble the Golf locally for now.
“Yes, there is a price advantage assembling locally but we have looked at the demand for hatchback models and it is not large enough to make a good business case for making the extra investment to assemble the Golf locally. Local assembly needs sufficient volume and we don’t think the potential numbers for the Golf will reach the required volume,” Mr. Winter explained.
“So we’ll continue to sell the Golf as a CBU import and the good thing about this is that we will be able to offer more options and features since the cars are produced in Germany,” he added.
Other new models for the Malaysian market were not revealed but a slide in the presentation showed the Arteon, T-Roc and I.D Crozz range. However, Mr. Winter said that the models shown were just a collection of what Volkswagen had launched or will launch (as in the case of the latter) globally, and not necessarily what VPCM would put in Malaysian showrooms. While BMW and Mercedes-Benz have been selling growing numbers of hybrid models, VPCM is not planning to offer them as the potential numbers are not large enough, at least in the short-term.
Whatever model VPCM introduces in the Malaysian market would have to be fully supported by aftersales services. Where parts are concerned, a new development in September this year will see the opening of a Regional Aftersales Centre in Tg. Pelepas, Johor. This facility will be a huge warehouse carrying stocks of parts for the different models sold in over 20 markets in the Asia Pacific region.
This will be especially advantageous for VPCM because it should be able to sell any model that is sold in the region as parts will be more readily available. Of course, introducing the model in Malaysia would also be dependent on potential demand and technical suitability for local conditions.
Understanding that while every part cannot be stocked by dealers, they need to be supplied to the service centres as quickly as possible so that an owner is not inconvenienced by a long wait. VPCM has streamlined the process of parts delivery and formulated delivery times for different situations ranging from 1 – 4 days. At least 95% of the parts for models distributed by VPCM should be available from the new facility and those that are not can be shipped by air, if there is an urgency.
Ensuring that the ownership experience is a good one will certainly help the brand as owners not only come back for their next car but also spread positive comments. One initiative to help owners reduce their motoring cost is free scheduled maintenance. This was introduced on January 1 this year and covers the first 3 years after registration. However, if you drive a lot, then the full 3 years might not be enjoyed as there is also a mileage limit of 45,000 kms.
For peace of mind, there’s also been a Roadside Assistance service available for some time. For the first 5 years after getting their new Volkswagen, owners can call a toll-free number any time of the day to get assistance if the vehicle is immobilised due to an accident or breakdown. It’s even available in Singapore and Thailand and includes vehicle repatriation.
While there are probably many different reasons for owners to call, the most common is battery failure. This has prompted VPCM to make arrangements for batteries to be delivered to wherever the vehicles are located. It’s important to have this service because most of the batteries in Volkswagens are specific types that might not be readily available in shops.
Two other developments will take place later this year – the introduction of the VW Marketplace and Das WeltAuto. VW Marketplace builds on the successful campaign which VPCM did with Lazada online last year. However, it will not use Lazada and instead make special offers on its own website from time to time. While bookings will be taken online, the final parts of the buying process would still require interaction with an authorised dealer. The day when a car can be purchased online and delivered to your home (like household items or pet food from Lazada) is still a long way down the road!
“E-commerce and online purchasing is becoming very popular in Malaysia – faster than many other countries – and we see this as an important development which we can exploit to sell cars,” said Mr. Winter.
Das WeltAuto is a complementary business for Volkswagen dealers to buy and sell pre-owned vehicles. It is available in some other countries and VPCM wants to introduce it in Malaysia. “Used cars are an integral part of the auto business and can be an additional source of revenue for dealers. We will start off with a few dealers who are interested in adopting the Das WeltAuto program and provide them the necessary assistance to do it in a proper manner,” he explained.
Mr. Winter did not specifically say that Volkswagens that were sold by grey importers would not be accepted and would only say that dealers would accept any vehicle which had a maintenance record available and be in a reasonably good condition. “Das WeltAuto will give customers an opportunity to own a Volkswagen at a lower cost and still enjoy the high quality the vehicles are known for,” he said, adding that other things such as financing would also be offered.