VW Mexico grows at 50 as part of Number One global strategy

VW Mexico grows at 50 as part of Number One global strategy

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MEXICONOW Staff Interview

Volkswagen had a milestone year in Mexico in 2013. It celebrated the production of 10 million cars and 11 million engines over its half century in the country. According to reports, the 10 millionth was a GSR Beetle that rolled off the production lines of the Puebla plant recently in August.

For Thomas Karig, Volkswagen Mexico Corporate Relations and Strategy Vice President, the VW goal remains to become Number One in more than just sales numbers:

How much progress has VW made towards the goal of being Number One in the global auto industry?

The number one goal is not a goal in itself. It’s to become not only the biggest but also the best car manufacturer in the world in terms of quality, in terms of customer satisfaction, in terms of employee satisfaction, of course in terms of financial returns. I think the Volkswagen Group is on the right path to do that. Nobody knows when exactly we will be number one but all the other parameters are developing quite satisfactorily.

What role is Mexico playing in that?

Mexico plays a very important role in that because Volkswagen still sees a big growth opportunity in the U.S. market. This opportunity has to be taken advantage of with cars made in the region and specifically in Mexico. This explains the expansion we have done for the Puebla plant, the new model we plan to launch in Puebla next year, which is the Golf.

There are also the decisions to build the Audi plant in Mexico and to make an engine plant that supplies both the Chattanooga Volkswagen and the Puebla Volkswagen plant. That is part of several steps that have been taken in the last couple of years to expand the North American operations and it’s becoming more and more important within the Volkswagen Group.

To what extent is Volkswagen’s success in Mexico due to exports versus the growth of domestic Mexican market?

I think it is both. The Mexican industry including Volkswagen would never have achieved the present status in terms of quality or in terms of economic scale without exports. That would not have been possible. The Mexican market is still an important part of our strategy, it’s about 20 percent of our revenue and we still believe the Mexican market has a big potential in terms of growth, in terms of purchasing power in the coming years.

When you talk about the exports, let’s put the names to Volkswagen-Mexico’s export cars.

We export all the cars that we manufacture in Mexico. Three of them are exclusively produced here in the Puebla plant, and from here go to the whole world. The new Jetta, sixth-generation Jetta, which has for many years been the most sold Volkswagen car in U.S. and it comes from Mexico. The Beatle, in both its versions as a coupe and a convertible is exclusively produced in Mexico and goes from here to all countries of the world. Also, the Clásico which used to be a fourth generation Jetta, which is today the number-one selling Volkswagen car in Mexico, is also exported to many Latin American countries. 

How would you assess the cooperation you are getting from the Mexican federal government?

Given the importance of the automotive industry in Mexico and the importance increasing in the next couple of years with new plants coming up to speed, there is a lot of attention by the Mexican government towards the industry. We are currently working in the manufacturing associations with the Mexican government to integrate all the efforts from the Mexican government’s different agencies in order to identify, and of course, take advantage of the opportunities there still are to develop suppliers, especially in the second- and third-tier level. 

There is a big opportunity if we can integrate the market, the demands and offer business cases to interested companies to be in Mexico or coming from abroad. This is something that has been working through very systematically.

Generally speaking the legal environment that the automotive industry finds in Mexico is very adequate for our operations. I could not tell you about any obstacle that we have to fight against in order to do our business in a very efficient manner. This goes especially for everything that has to do with imports and exports, where I think Mexico is a benchmark against other developing countries in terms of the facilities that you have to import and export your goods.

Volkswagen continues to make very significant, very large investments in Mexico. What tells you that this is the absolute right thing to do?

I would say what we are betting on is the success of our products, independently if they are manufactured in Mexico or not. But Mexico as I said also has still several advantages to comparable countries in terms of free trade, in terms of a very solid supply base, in terms of many decades of experience in building cars and serving the world markets and of course a very competitive production cost overall.

What do all these large investments by OEMs in Mexico mean to the suppliers?

We have been very successful in the past. We still are interested in suppliers that are not in Mexico yet to come to Mexico and to expand their operations as we do. I think it’s not only Volkswagen. The important thing for many supply companies is that when they come to Mexico they not only have one client be it Volkswagen or somebody else, they have an industry that is going to work for the production of 4 million cars in the very short period.

The next big international trade agreement for Mexico is the Trans-Pacific Partnership. What is your view?

The good news is that free trade is part of government strategy and it has been for the last 20 years; the continuity is important thing. The companies can be sure that this will be in place next year or the next 10 or 20 years The commitment that Mexico is now making for example first with their Latin American partners on the Pacific side and then in the next steps with other countries on the other side of the Pacific is a very clear signal that free trade is here to stay. 

The downside of course: Every time you talk about free trade is that free trade means not only that you open new markets for your product but you also open up your own market for new competition from other countries. This is something we have to face and I think we are prepared to do so.

You’re smiled when you said that. Why?

It’s not only for the companies to be aware of being competitive, but also for the governments. Because governments, countries are starting to compete against other countries, not only in terms of quantitative incentives to invest in the countries but also in terms of making sure there are not non-tariff barriers, not unfair trade practices between these countries. I think opening up to Asia opens a whole new set of issues in this sense.