VW: Mideast is most diverse market in the world

Thomas Milz, managing director of Volkswagen Middle East, celebrated record performance in the region last year and is launching a number of new vehicles this year such as the Beetle, Golf R and the Scirocco.
He also focuses on Service Excellence to match the 10 percent rise in sales achieved by the company.
The company is expanding its development in the region with a $20 million investment, including the largest VW outlet in the world in Kuwait.
In an exclusive interview with Arab News in Bensberg (Germany), Milz said the company is unique in offering German engineering of premium products at affordable prices.
He sees the Middle East markets as the most diverse in the world and notes that consumers have more to spend now than they did three years ago.
He shares the company’s vision of aiming for number one in the world.

These are some highlights of that interview:

How is VW doing in the Saudi market?
We have an independent company in Saudi Arabia that is taking care of Saudi business. I am not in charge of the Saudi market as VW has established a joint venture with Al-Sief and SAMACO local companies. The distributor is Volkswagen Saudi Arabia.

Have you expanded on the service side in the region?
Basically, what we have done two years ago is a program of investment to expand service centers. This year we have opened six new showrooms in Sharjah, Fujairah and Deira in addition to new showrooms Kuwait and Oman. So, by the end of this year we will have 18 outlets in the Middle East.

Which models are the most successful in the region?
The Middle East market is divided into two major segments: SUVs and sedan cars. We already have the most successful Touareg and Tiguan in the SUV segment and we have three sedans: the Jetta, the Passat and the Golf. Passat has proved to be very successful volume-wise — we sold about 3,000 vehicles, closely followed by Touareg, Jetta and Tiguan.

What would you say is unique about VW in the region compared to other manufacturers?
It is the German engineering. When you look at the market, you find luxury brands and Japanese and Korean volume brands. We are offering premium vehicles at volume brands prices. The Passat for example is a true VW car but its price is very similar to Japanese cars. This is why we have been successful in growing our market share. So, the uniqueness is that we are premium with sophisticated German engineering but we offer our products at affordable prices. This is something that only Volkswagen can do.

Based on your own experience, how different are the Middle East markets from other world markets you have worked in?
The Middle East markets are the most diverse markets that I have ever worked in so far. I lived and worked in America and experienced the American market and also many European markets. What makes the region unique is that it has so many different countries. Take the UAE, where the majority of consumers are expatriates from India, Pakistan, Europe, South America, Australia and America. These expats have so many backgrounds and when they buy cars they do not necessarily buy cars preferred by the local customers. Meanwhile, in a market like Oman where 78 percent of customers are Omanis, one needs to cater products and market activities to suit Omani customers. The regional market is very interesting but it is also challenging. The diversity makes it harder to sponsor any specific activity for the region like cricket in India or American football in America. Yet, the diversity allows Volkswagen to offer all its diverse portfolio of products in the region.

How often do you travel in the region?
Very often; I even spend my vacations in the region to explore, get closer and understand the markets. I am probably one of few Germans who spent their vacation in Kuwait. I live in Dubai but I also spent time in Oman, Lebanon and Jordan.

Have you noticed any change of trends or consumer attitude in the region over the past two to three years?
When I came to the region in 2012 it was the end of the global financial crisis. Customers were very sensitive and did a lot of research and analysis before buying. But these days there is more prosperity in the market and people are more willing to spend more money on cars — more for pleasure than need. The GTI models are sold out in the region since last year. We also sold 250 Golf R models even before the car arrived in the region. This indicates that people are spending more now than they did in the past three years.

What motivates people to buy new cars in the region?
They buy for pleasure and to show that they can afford these cars. Yet, the majority of consumers are still price conscious and that it why VW cars come with three-year warranty and free services up to 45,000 km. Warranties are extendable to five years.

In the price-sensitive segment of the market there is a lot of competition, which is the more serious to VW?
We keep an eye on everyone in the market. However, the Korean brands are renowned for lower prices but it is up to customers to decide what they can afford and what they want to afford. Yet, the most serious competitors in the volume segment are the Japanese brands. We also have competition from German companies to the Touareg.

It is reported that VW is pursuing the target of being number one in the world, what would that position give you that you do not have now? and don’t you think profit margins are more important?
Volume and profit margins are equally important but most important is that companies should have strategies and vision. VW has always set the target to be number one even when we were number four or five in the world. The strategy worked well because now we are number two in the world. While it is not about volume or profit margin, I think the most important aspect is customer satisfaction. If a company cannot satisfy its customers, it won’t be number one for long.