Democratizing German engineering and technology for the people

Automobile Central Enterprise Inc. (ACEI), the wholly owned subsidiary of Ayala Automotive Holdings and sole authorized importer of Volkswagen cars in the Philippines, recently invited select media to the opening of their third purpose-built facility in Cebu, the Queen City of the South.

 

ACEI sees the Cebu facility eventually turning into a regional hub for the VizMin region, receiving direct shipments of cars and parts from abroad, thus lowering costs and speeding up service and the delivery of new vehicles without being dependent on Metro Manila’s currently troublesome port and traffic woes.

 

Cebu City Mayor Mike Rama and Honorary German Consul in Cebu Dr. Franz Seidenschwarz were the guests of honor, along with the movers and shakers of the social world, business leaders and prominent personalities of the south.

 

The event also gave media an opportunity to have a very casual chat with top ACEI executives, especially John Philip “JP” Orbeta, president and CEO of ACEI and its parent company Ayala Automotive Holdings, which is under the Ayala Corp.

 

Personally, I’ve been quite critical of how ACEI has gone about marketing their vehicles. For lack of a better description, it seemed like the guys in suits didn’t have an idea of how to properly push the brand and its cars.

 

Sales seemed to have been very slow from the start, and ACEI had a problem with its cars being stuck in Customs for a very long time due to difficulties. Slowly but surely, things have improved, with ACEI’s Volkswagen sales last August hitting a high of 60 units, according to its public relations people.

 

So I asked JP Orbeta who he perceives to be the company’s most direct competitors.

 

I wanted cold, hard and definite facts and figures to ascertain if they knew what they were doing. Mean of me, yes, but even if the Ayala Group is part of one of the largest conglomerates in the country, with seemingly endless funds and resources coupled with the most brilliant minds working for it (JP Orbeta himself is a human resources man who was once voted by his peers as the best HR person in the entire country and across all industries, according to his golfing buddy and Lexus Manila president Danny Isla), if you don’t know cars, then you might as well sit by the side of the road and start tearing up or burning thousand-peso notes.

 

JP Orbeta, always the kind, warm and friendly person that he is, saw through my question and gave me an answer that blew me away: “We (ACEI) want to democratize German engineering and technology for all people.”

 

Indeed, going through previous articles dating back to their launch just over a year ago (in Sept. 28, 2013), these were the very same words JP said. Hearing these again, and seeing the more complete model lineup, it finally made sense.

 

Tariff and logistic problem

 

The real problem with VW really isn’t in the product lineup. It has excellent everyday cars that are technology-packed, very safe and fuel-efficient, particularly their TDi diesel lineup. The sales and marketing people are very passionate about the brand and its products, and are very highly motivated. The problem is tariff and logistics.

 

Since Volkswagen doesn’t enjoy the Pjepa (Philippines-Japan Economic Partnership Agreement) or the Afta (Asean Free Trade Agreement) perks unlike its key Japanese- and American-branded, made-in-Thailand rivals, taxes will be higher on its cars. And because many of the cars come from Germany at the moment (except for the India-sourced Polo Notch), it pushes up logistics cost.

 

I remember Mitsubishi Motors Philippines Corp. issuing a statement before, saying that switching production of the Lancer sedan from Thailand to the Philippines saved them around P70,000 on logistical expenses alone, not even factoring tax savings. Thailand to the Philippines is such a short distance. What more India? What more Germany?

 

In Europe, Volkswagen competes head-on with Japanese and Korean rivals. On that side of the world, the Asians of course are at a disadvantage, so I guess on a global scale, things even out here.

 

But aside from the more expensive German-sourced cars, few generations of Filipinos were weaned on Japanese and, later, Korean cars. We’re just not used to how German cars feel. Indeed they are more expensive, but in the automotive industry worldwide, there are four Holy Grails to consider: Japanese efficiency, American economies of scale, Italian flair in design and German engineering.

 

It is this engineering that we do not normally see and do not normally experience, and hence take for granted.

 

Some people see German engineering as a synonym for complicated, particularly in relation to aftersales servicing. That may be true, but I also believe that too many people like to skip maintenance, shortcut the process or cut corners in the name of cost savings. Maintain a German car the way it is supposed to be maintained and it will surely outlast many, if not almost all its Japanese, Korean, American and even Italian contemporaries.

 

Looking at Volkswagen’s local lineup, many have diesel engine power and efficiency, are loaded with safety equipment other brands wish they had, and possess impressive driving dynamics which means their Asian and American rivals will never see which way they went. But aside from taking engineering for granted, we’re always stuck in traffic so we never really feel the difference.

 

Changing landscape

 

But the landscape is slowly changing. Sales are improving, plus more and more people are taking notice of VW cars. The Beetle is cute but, really, for that much money, I’d rather spend on something faster, flashier.

 

VW SUVs and MPVs are the real value-for-money family car propositions. As the local automotive scene evolves into a more sophisticated market that values fine engineering, demands for increased safety and desires vastly improved driving dynamics, more people will be looking toward Volkswagen.

 

The sneak peek of the all-new seventh-generation Golf GTi, with its 2-liter TSI engine and six-speed DSG gearbox has enthusiasts excited. JP Orbeta says that if they can get a minimum of 50 orders per year for other VW models such as the Polo GTi or the Golf-R, they will definitely bring them in.

 

JP Orbeta alluded that ACEI overestimated its capabilities and underestimated the competition, and failed to understand the whims of the market. Growth has been far slower than expected. But acknowledgment of the facts means that the guys and gals of ACEI are on the right track. Volkswagen AG have also been more closely involved in ACEI’s operations, having two German consultants working alongside ACEI’s top brass.

 

And aside from the Volkswagen facilities in Bonifacio Global City and Cebu, there’s a massive aftersales service center located on Sheridan Street, Mandaluyong City, right outside the booming Greenfield District, and a stone’s throw away from the bustling Ortigas Center in Pasig City.

 

Two satellite sales facilities with quick service are opening on Quezon Avenue, Quezon City, and right outside Ayala-Alabang down south. More facilities means the brand and its products are easier to reach. And more cars are on their way to our shores in the very near future.

 

In closing, while Volkswagen still has a long way to becoming a true people’s car in this country swamped with Toyotas, Hondas, Mitsubishis, Hyundais and Fords, ACEI has a real, workable plan. Grow the network, educate the people, introduce more cars and prop up the brand.

 

Unofficially, Volkswagen wants to be in the Top 5 in both sales and top-of-mind recall within five years. Even with their seemingly unlimited resources, great people working behind the scenes and really good model lineup, it’s going to be a long road ahead, but it’s definitely achievable.

 

No need to walk into a German luxury car showroom, manned by sometimes snobby salespeople who have the knack to make one feel nervous by not taking you seriously. At Volkswagen, everyone is welcome. It is, after all, the original people’s car, as its name proudly states.