The Philippines joins the growing Volkswagen network in the Asia-Pacific

FOREIGN visitors joining the festivities

When the Volkswagen brand was launched last weekend with a festive public display of its cars at Ayala Corp.’s Greenbelt Makati stomping grounds, the theme was “The Time is Now.”  Europe’s biggest automaker (12 car brands, 104 production plants worldwide, 37,700 vehicles produced every working day) showed perfect timing in returning to the Philippines now that the nation’s economy is growing, consumer confidence is strong and car sales this year are expected to hit 200,000 units for the first time in history.

THE SECOND part of the launch party at the Ayala Museum

Aside from perfect timing, Volkswagen AG showed perfect choosing when it selected Ayala Corp. as its Philippine partner over other applicants.  At the launching program last Friday in the courtyard of Ayala Tower One, Weiming Soh, executive vice president of VW AG and president of commercial operations of Greater China and Asean, drove onstage in a classic Beetle and acknowledged Ayala as an equally strong corporation backed with a long and illustrious heritage and record of success. He said that a strong partner is critical to VW’s success, so he was personally delighted to have forged an alliance with Ayala. He added that knowing how well-loved Volkswagen is in the Philippines, “we are very excited to reconnect with the Filipino market” and invited everyone to celebrate the return of the original “People’s Car” together with Ayala Corp.

Ayala Corp. president and chief operating officer Fernando Zobel de Ayala, who followed Soh onstage driving a Beetle Cabriolet (generating shrieks from admiring females in the audience), said that Ayala was honored to be instrumental in bringing back an icon and heritage brand to the Filipino people:  “Volkswagen is indeed the original people’s car, and as a company that cares deeply about the Filipino, that is a personal pride for us.”

AYALA Corp. head for corporate strategy Paolo Borromeo, Orbeta and Finance Secretary Cesar Purisima

DAS AUTO. However, the people’s car, the Beetle, is not only what VW is all about. As Soh said, “Das Auto in those days was the Beetle.  Today we have different models for different people.” In fact, Automobile Central Enterprise Inc. (Acei), Ayala Automotive Holdings Corp.’s wholly owned subsidiary that will import and distribute VW passenger cars, is kicking off sales at its first dealership in Bonifacio Global City with the following diesel (TDI) offerings: Jetta 2.0 TDI compact sedan, Touran 2.0 TDI compact SUV, Tiguan 2.0 TDI SUV and the midsize Touareg V6 TDI MPV. The initial offerings are all diesel because VW AG found gasoline sold here unsuitable for their petrol engines. The 21st-century Beetle, a unit of which was raffled off online last Sunday, is expected by yearend or early next year.

At a press conference following the launching ceremony, Soh said that after successfully establishing the brand in China as the sales leader, VW regards the Asean market, including the emerging Philippine market, as the next frontier in the Asia-Pacific region. “Looking at Asean, we saw a four-million market, so we have to come here. Asean will take off in some years, it’s not happening overnight.  They said that Asean prefers Japanese cars, but we have to improve market share in two or three years.  We came here to launch a brand, explain to the Philippines what we are, the passions we go by. We have an attitude to develop the business. What’s important is the market.  We need to know the market, to learn who our customers are, how our customers are different from Toyota buyers.  I’m very hungry to learn the market.”

FROM left, president for commercial operations for Asean and Greater China Weiming Soh, Ayala Corp. president and COO Fernando Zobel de Ayala, adviser to the board of management sales and marketing Ulrich Thein, Ayala Automotive Holdings Corp. chair and president John Philip Orbeta and executive director for Volkswagen Sales in the Asean region Armin Keller

Weiming Soh, 47, is evidently a fast learner.  A Singaporean who earned his MBA at a university in the United States, Soh was vice president of Daimler-Chrysler China Ltd. before joining the Volkswagen Group China as one of the six members of the board of management, and as EVP for sales and marketing in 2005.  The Volkswagen Group China was founded in 2004 to coordinate and manage the activities of the group in China, where VW AG has been active since 1984 and is still the dominant car manufacturer with 20-percent market share.  Soh’s inputs as a management board member must have contributed to VW’s continuing tremendous success in China and led to his promotion in 2009  to EVP of VW AG and president of commercial operations in Greater China, Taiwan and Asean.

AFFORDABLE. VW AG carefully studies a market before entering it.  With two failed ventures in the past (DMG Inc. and the Rodriguez group), VW AG must have conducted a particularly thorough research of the current Philippine market and saw that the German-brand cars offered here are all in the premium class with prices to match—although, ironically enough, Porsche and Audi also belong to the VW Group.  Harking back to the beginning when founder Ferdinand Porsche dreamed of creating a car that was affordable for everyone as he developed the first VW prototype, Soh pointed out that the idea of “mobility for all”—for people across all ages—is the foundation upon which the VW brand is built.

John Philip Orbeta, Acei president and CEO and concurrent chair and president of Ayala Automotive Holdings Corp., emphasized that Acei aims to fulfill the Filipino consumer’s aspiration to own a world-famous, reliable and yet affordable German car like a Volkswagen.  But this may be easier said than done. At present, the most affordable VW that Acei is offering is the P1.295-million Jetta 2.0 TDI compact sedan, which produces 110 PS (108.49 HP), 280-Nm max torque and has a five-speed manual transmission.  The least affordable is the P4.29-million Touareg V6 TDI  (245 PS or 241.64 HP, 550 Nm, eight-speed automatic transmission). Other European brands, such as Sweden’s Volvo and France’s Peugeot, are a bit less pricey than the German brands, but they don’t carry the coveted cachet of “Made in Germany.”

SOH AND Zobel de Ayala presiding over the launch at Ayala Tower One Exchange Plaza

Given these premises, could there be a VW in your future costing less than P1 million? It’s too early to tell, both Soh and Orbeta said. Acei’s business plan, pricing and sales targets are still a work in progress since there is no VW car plant in Southeast Asia and cars cannot be sourced from China, where VW AG’s partners,  Shanghai Automotive Industry Corp. (SAIC) and First Automobile Works (FAW), don’t allow the export of VW vehicles.  Moreover, Orbeta said, VW AG does not produce enough cars in China to meet domestic market demand. News wires online recently reported that in the first semester of 2013, VW sales in China were up 19.4 percent with 1.2 million units sold. No wonder VW AG plans to ramp up China production from 2.8 million vehicles a year to about 4 million in 2018 by opening five new factories  with total investments of $18.8 billion by 2016.

ORBETA talking to reporters at the Volkswagen exhibit hall. Photos by Arnold Almacen

SOURCES. So far, Acei is sourcing cars from VW factories in Mexico and India, with Brazil a remote possibility.  Considering the shipping costs and the customs duties involved, Acei may have to subsidize the introductory prices—if they’re not doing so already. The question is whether Filipino car buyers are willing to pay more for a Volkswagen than for a Japanese, American or Korean car. Acei is banking on the brand’s global reputation for quality, durability and safety plus Filipinos’ fond memories of the classic Beetle and the Kombi, VW’s durable transporter van—the production of which, incidentally, ends on Dec. 31 in Brazil after 63 years and 10 million units sold globally.

The Philippines, with its tiny market demand, will most likely not play a major role in Volkswagen’s Asean program nor in its bid to become the world’s biggest carmaker by 2018 which Soh said “is not just an operational strategic vision.”  But the mere fact that Volkswagen has come back for good with the highly respected Ayala Corp. as its local partner shows that somehow, we are gaining traction as a small but significant market player in the automotive universe.