Interview – Alex Smith, Managing Director, Volkswagen Group UK

Alex Smith returned to head up Volkswagen Group UK last year, having been managing director of Nissan from 2016, and previously working within Volkswagen Group since 2007, running Group Parts Operations, Retail Operations, Commercial Vehicles and Cars.

As well as managing the fortunes of Audi, Seat, Skoda and VW cars and commercial vehicles during the ongoing Covid-19 crisis, he has been part of an automotive group co-organised between the NFDA and SMMT, representing the industry’s needs to Government.

Lockdown appeared to catch some parts of the industry by surprise. How ready were you?

“We’re part of a global organization, and therefore the communication between markets and between various parts of the organization is strong, so early on we were in contact with our colleagues in China and our colleagues elsewhere in Europe. “By coincidence, last year, one of the first things we did when I rejoined the organisation was to get the business continuity plans on the table and review them. We had no idea what was coming then, of course – but it did mean we were as ready as we could be.”

Was every part of the business affected similarly?

“From a national sales point of view, I think we were relatively well prepared, but of course there are other parts of the chain that faced a far more complex problem than we did, and I have to say I think they all coped admirably. ‘However, for some of our parts suppliers and distributors, and our customer service centre, things got a lot more difficult. They coped wonderfully, moving rapidly to remote working, building data-secure PCs to use at home and so on. Likewise, our retailers, who responded magnificently, working with our logistics teams to shut down the supply chain at what was, of course, the busiest time of year.”

Did everything switch to home working, or did any of the teams work through?

“Most did, but I think the focus of praise for those that didn’t must go on the dealers. The benefit of VWG having five brands was that we could organise into effective national service centre zones, to ensure we were efficient and able to keep emergency and key worker vehicles on the road. We could strike the right balance between national coverage and keeping people as safe as possible. “On top of that, our Trade Part Specialist network remained open nationally to deliver parts that were used to repair and maintain emergency vehicles and key worker vehicles, and parts distribution from our central parts warehouse continued without any interruption whatsoever. “What mattered was that we were still able to make a contribution to the national effort in a responsible way and on a full national coverage basis. In a very trying situation, I’m exceptionally proud of the way that everybody conducted themselves and pulled together.”

What was the mood like as the reality of the situation became apparent?

“It never felt low. One of the pleasures of working for Volkswagen Group is there’s a very practical, positive attitude in the organization, and we find that same attitude in the retailer networks as well. It’s about playing the situation as it is in front of you, and taking the correct necessary steps every day at work. Every day was approached on a practical basis, looking at what we could do rather than what we couldn’t do.”

What sort of things could you do?

“What we found was that we had a lot of capability already, be it with our virtual showrooms, which relocated to the driveways of our demonstration team, to electronic signatures, which we’d already been using. We were already capable of operating online, it was just the case that we were relying on our digital capability far more. “What did become clear was the strength of having five brands, and the efficiencies that gave us. We could communicate across them very quickly and efficiently, and ensure that we had a national overview on all the decisions we were making.”

Were you selling any cars at the height of lockdown?

“Well, April was down 98%, May nearly 90%. I think that the public legitimately had greater concerns on their mind. What was important was that we were available for our customers throughout, be it for sales inquiries, servicing inquiries or whatever, and all via a range of platforms and a range of methods. If our customers needed us, we were there.”

How do you forward plan during a period of so many unknowns?

“You blend intelligence from other countries that were at different stages of the crisis, and what’s before you. Where we could learn we did learn, for instance in obtaining intelligence in terms of how quickly, for example, demand for aftersales services might return. Elsewhere we are judging the situation according to our local conditions.”

What have you experienced since dealerships reopened?

“Obviously they are opening in a staggered fashion between the home nations, so England provides us with the best snapshot over the past four or five weeks. From reopening we saw a surge in used vehicle demand, with the new vehicle business picking up as well after a bit of time, and then the service businesses bouncing back very strongly. “But I do expect it to be a fast-changing situation. I’m cautious because it is obvious there would be a period of pent-up demand after the long period of inactivity. The positive is that our dealerships are open or opening again, and our systems are running smoothly – that’s a fantastic credit to our retailers”

Can the market keep moving forwards enough to be organically sustainable?

“It will depend on how the general economic scenario develops over the next few months. I think our natural response is always to look at the positives. We know that in the UK that we have a new vehicle park which is predominantly made up of fixed term finance contracts, so there will always be prospects and customers who are in the position where they will need to make a decision regarding their future car ownership.

“We also know that customers are always attracted to brands that they trust, and products which have great design, fantastic technology, and all the things that our brands are associated with. We have the new VW Golf 8, Audi A3 family, Skoda Octavia, Seat Leon, and a new Q5, plus, as we go forward, we introduce the Volkswagen ID.3. “These are products that, regardless of the economic circumstances, consumers are going to be attracted to.”

Will there be enough buyers out there, though?

“It’s too complex and too uncertain to predict. There’s an SMMT forecast that is public, but it is attempting to predict the unknown – there isn’t a clear picture available as to the strength of the economy going forwards, the replacement cycles major fleets will run to, the state of the Motability market, the new vehicle launches that are coming – more than ever we are living day by day.”

It’s early days, but can you see any changes in consumer behaviour yet?

“It is too early to predict anything, but what I would say is that the trends that are likely to emerge were probably going to happen long-term anyway, be they around powertrain choice, downsizing or upsizing, or the types of vehicle being chosen and how they are being bought and so on.”

You’ve been a key part of the joint manufacturer and retailer network talking to the Government throughout the crisis. How has that been?

“One of the things I’m most proud of is how well manufacturers and retailers have worked together. We’ve communicated well, acted fast and been careful to align our views to present a cohesive argument to Government in the best interests of the industry and consumers.

“To give you an example, through May we worked hard to demonstrate that the automotive retail sector was capable of operating in a covid-secure manner and worked very hard to put that message across. The result was that click and collect was allowed from mid-May and dealerships in England were allowed to open from June 1.”

Are you still pushing for a scrappage scheme?

“I think the important thing for us is to concentrate on the elements that we can influence, and that means giving a fantastic customer experience through all of the channels that we’re able to deliver that experience.

“It’s evident that market stimulus packages can make a difference supporting and encouraging people back into showrooms during a crisis situation. And we would welcome measures that encourage customers back into our dealerships.”

Have this year’s issues heightened your concerns around potential disruption from Brexit?

“With regard to Britain’s future trading relationship with Europe, we continue and always have kept a very close eye on the latest developments. We will always review the whole spectrum of possible effects, so we’re prepared for a wide range of scenarios.

“There will be hurdles, but they can also be opportunities. What we can see at the moment is an exceptionally strong product plan from all of the brands in the Volkswagen Group, and this is a fantastic position to be in. We can see strong demand for low-CO2 vehicles, for hybrids, for battery electric vehicles. We have to focus on the positives.”

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