The new Face of Volkswagen
in Western Australia.

• BF: This is something about which many Club members are curious; why did you pick the Volkswagen marque?

• JH: Well, new car franchises are not easy to get today. And other manufacturers are pretty well covered in the metropolitan area.

  I've been interested in Volkswagen for a while because it was incredible that a car that was so popular in Europe, was so unpopular if you like, and that's not quite the right word; under-exposed in Australia.

  I knew that they've got some pretty good new models out, and new ones coming out, so I had a latent interest. They approached me, I didn't approach them, said would I be interested in talking to them if they came over the Inchcape group the importer.

  I made it very clear to them right up front, that I would not be interested in taking on the franchise as long as there was another VW dealer in Perth. I didn't see that their market was big enough to support two dealers. The problem you get when you get two dealers trying to sell a product might only sell 50 or so new cars a month, and they sell 20 or so each and cut each others' throats in the process and won't make any money.

  Which then doesn't give you the financial support to advertise and promote the vehicle properly; to provide the correct after-sales facilities, to get involved in airport displays, the Royal Show and that sort of thing because you're not making any money.

  They [Inchcape] said that that would be difficult because there were already two established operators and Regent Motors were already suing them because they sacked Regent Motors from the Subaru franchise. I said well, I'm interested, but that's my position.

  While all of this is going on, this warehouse or showroom which used to be owned by Solomons became available. I looked at it and over about a year, half-negotiated on the price.

• BF: So this dates back to the beginning of 1997?

• JH: Yes, at least early 97.

  And then, it's marvelous you create your own destiny of course, because if you don't go out and grasp the nettle, I think I went out bought that showroom even though I had nothing to put in it and then a week later they [Inchcape] called me and said "Yes John , we'd be happy to appoint you the sole VW dealer in Perth". That's how it started.

• BF: Where do you see the Volkswagen marque going in Western Australia? What sort of market segments are you looking at? It's hard to sell small car into a luxury market what happens to the Polo, and the Golf?

• JH: VW has an excellent reputation for durability and reliability. They last, they're predictable. They start, they go. Might sound a bit simplistic but a lot of old cars don't.

  Also there's a very very strong core of people who've had VW's in some stage of their life and who love the product. Now, I don't know about VW getting into the luxury end of the market, Ferdinand Pich talking about Rolls-Royce and competing with Mercedes, and things like that. I would have some reservations about that.

  Lexus; I don't think Lexus is competing, even though they apparently make a very nice car I'd never buy a Lexus in a fit because it's a Toyota.

  It would be very interesting to see how the Passat goes in relation to the Audi; I've already lost a couple of sales because they wanted the four rings on the bonnet. So there was an aura, and image, a prestige that BMW, Mercedes and possibly Audi have, that VW has yet to achieve. I'm quite positive that it's up there with SAAB and Volvo and some of those others, but I think it'll take a while to establish itself if indeed it ever does in the $50,000 to $60,000 price range

  The Polo is our entry car starts at around $23,000 by the time you drive it away. The Golf is a good seller, between $25,000 and $30,000, and is a well-known car. A lot of people know the Golf, it's been around a long time

• BF: About 20 million!

• JH: We are helped to some degree by the number of South Africans who come and lived in Western Australia, there are quite a few. And they know what VWs are, they've grown up with VWs in South Africa.

• BF: Do you find that there's some underlying, let's call it bigotry against water-cooled Volkswagens?

• JH: Yes.

• BF: Have you seen market resistance or buyer resistance because of that?

• JH: I haven't found that yet it could be some sort of sub-culture. Nobody's ever come out and said that. But there could be.

  And the commercial range is quite good, the Transporter is not cheap, but it is the Rolls-Royce of vans, probably $7000 or $8000 dearer than most on the market, but it's got a lot more features.

  Where do I see VW? I see it being very successful up to about $50,000 or $60,000, at this stage I see that they've got the job ahead of them getting up to the 80s, 902 and 100.

  Why did they call this new Passat, the Passat, because it sells very well in Europe it didn't have such a good name in Australia. the early Passats weren't the best of cars and old memories sometimes die hard. But I would see the strength of VW as being, if they can, to continue to bring out cars that we can sell here for under $50,000.

  If they can convert their image, long-term, into a luxury, up-market car, then that's fine, Can you imagine somebody paying $150,000 for a VW, in Australia?

• BF: For a W12, not a problem They're people lining up for it in Europe.

• JH: This is not Europe. That's the big point.

• BF: Australia's fairly xenophobic, but it's surprising to see Asian marques being so well represented, but the pocket-book always tells you ultimately which car to buy.

• JH:

  Australians have a fair way to go yet to be really educated to quality and performance.

• BF: Do you see Volkswagen as competing with the other marques which you sell and how do you plan to resolve what could be seen as a possible conflict of interest?

• JH: That's interesting because very unusually, on this side where we sell new Hyundai and new Mitsubishi, the sales people are allowed to sell both or either. That poses me some problems sometimes . but I need to be conscious of the level of sales of either marque. I try to be diplomatic when asked for recommendations, outlining the various pros and cons.

  When it comes to VW, it is stand-alone for a start. It will attract people who are genuinely interested in VW. It's not sitting along side a Mitsubishi, Daewoo, Ford or Hyundai, and they are dedicated sales people who are professionals and who, I believe, are very knowledgeable about the product.

  Being a stand alone operation, VW won't compete with other types of vehicles that I sell. to some degree VW is a reasonably specialist field, in that, not always, but the bulk of VW buyers are just that; VW buyers. About 40% might shop around other makes and models.

  I've had one or two salesmen who gone over there [VW] and ask for a transfer.

  It's close enough and far enough. Close enough to administer, but far enough that it's that dichotomy; split loyalties if you like.

• BF: Do your plans include supporting other Volkswagen-owned marques such as SEAT and Skoda when they are re-launched?

• JH: They [Inchcape] have yet to appoint a SEAT dealer in Western Australia.

• BF: Seeing that the re-launch is supposed to be in August.

• JH: they have told me unequivocably, that if I want SEAT, I've got SEAT. because I've assumed the responsibility for the warranty, I've assumed responsibility for the parts. and we're doing 2 or 3 SEATs a day in our service division. there are about 300 SEATs registered owners in Western Australia.

  My last discussion with SEAT is that they want to bring them in, the Spaniards are keen to bring them in, its purely a question of exchange rate.

  The Cordoba is the one they want to really like to bring back in, and quite clearly, I will be first cab off the rank if I want it if they bring it in. I then read since, that they're going to bring them into the east coast first, and then probably over here in 1999.

  I would expect that if I want it, that I would be the SEAT dealer. And the only one.

• BF: Would you set up separate facility or sell alongside VW.

• JH: They would not be separate.

• BF: What about Skoda, or is it still too much of an unknown seeing the even Inchcape apparently know if they want to do it.

• JH: I think they should look at Skoda.

  My understanding of it now is that Skoda is not a bad car. If Skoda were to be brought into Australia, I would be quite interested in looking at it.

• BF: As sole, authorised dealer, what level of service do you offer to existing and prospective Volkswagen owners in regional WA?

• JH: It may be possible that some buyers think that this is going to happen; that John Hughes will sit back, cream the market from the devoted VW buyers, get full price on every deal, keep expenses to the minimum and make a nice profit. Nothing would be further from the truth.

  I want to re-establish the brand, I want to get more cars out there, I want to get more people driving them, I want to get more cars being seen.

  Not the least of the reasons being that it'll help me in the long term. but the other thing is to the responsibility to myself and to Inchcape, to get the volume of sales through that they expect.

  I've got to remain competitive and not just think that I'm the only VW dealer and therefore I can dictate the pace. Doesn't happen that way because if they don't buy a VW they'll buy something else. So I'm competing with all the other dealers competing in that price range.

  As regards to local service, I've told Inchcape, that I am determined to be their top CSI (Customer Satisfaction Index)-rated service and sales dealer in Australia. That's not an idle boast, I'm number 2 in Australia in Hyundai, and that's with the world's biggest selling body.

  I want to make sure that that's translated to the same service with VW locally. And we have two service centres; one in Victoria Park and one in Belmont, and we have also got 7 mobile service vans, so I can go anywhere in the metropolitan area and service vehicles at people's place of work, or home or whatever.

  Now in the country, it's a different situation. In fact it's a very timely question. I'm about to approach inchcape to see if they'd agree with me running an ad, appealing for major regional country service centres, well-established dealers with good service centres, who want to be appointed VW servicing agents. I've got no doubt that I'll find a very good one in every major town. You know, Bunbury, Albany, Geraldton, Kalgoorlie, those places.

  The next logical step from that would be, again with Inchcape's approval, to see whether or not these service centres could become sale agents of ours, maybe have one or two cars in the showroom maybe on consignment

• BF: Especially with commercial vehicles?

• JH: Absolutely. Yes, so that is something, in conjunction with Inchcape, that we should be pursuing.

• BF: There are dozens of Volkswagen specialist repairers, some with history and experience which dates back to the 1950s. How do they fit in with your idea about how service should be working?

• JH: Inchcape tell me that there are 98 thousand VWs registered in Australia, 90-odd thousand over 10 years old. there's an enormous market for service and parts for those older vehicles. I don't know enough about it yet to make a qualified statement, but its an area we obviously got to look at, primarily because of the profit factor, and secondly because it will further entrench us into the VW folklore.

• BF: So you're looking at being the primary parts supplier to them?

• JH: At the moment, we're not stocking parts for older VWs, but I think we should.

• BF: Would you be looking at meeting with proprietors and mechanics to discuss their needs and expectations.

• JH: If, when we look at the parts side, it looks viable, well obviously we'll be approaching those established repair outlets to get a connection with them. But we should be doing that anyway, because they're repairing old VWs and the chances are that somebody will say that its costing me too much and they want to buy a new one.

  That is a logical extension of having the sole Volkswagen franchise in Western Australia.

• BF: What resources do you have at Skipper VW to solve difficult problems relating to the complex systems in modern VWs, and problems with older cars?

• JH: Let's have a look at the new ones first. we've had 4 people go over and spend two weeks in Sydney with the VW people. they come over regularly and conduct courses and clinics for us. we've got 100,000 dollars invested in the latest tools parts over the counter or at the latest within 48 hours from Sydney.

  I don't believe that we've got the slightest problem in attending to any concerns with the new model.

  As regards to old vehicles, I don't think there's nothing terribly intricate or complex about servicing or repairing the old VWs. I will at this stage probably say that there are people with a lot more experience working with the old cars than we've had because were relatively new in the business.

  But that's something we've got to learn to pick up if we want to get into that sort of business.

• BF: What are you going to do about supply problems with new cars.

• JH: Not a lot I can do.

  And there are supply problems. We're short on Polos we were told before we took on the franchise that Polos were always hard to get. There is no answer to that.

  Passats are rationed, the Beetle when it comes out next year; if I get 8 to 10 a month I'll be delighted In high-volume locally-produced franchises, your supply rate is determined by your previous 3 months sales.

  With VW and other imported vehicles, it doesn't quite work that way. The people who make them determine what they export. That's your biggest problem, getting supply from the factory. If they have a run on left-hand-drive, then right-hand-drive countries get squeezed for a while.

• BF: There's a much greater presence of VWs over east.

• JH: Before I answer the question, why do you think that is?

• BF: One of the reasons is that there are lots more VW dealers in states like Victoria. Even Tasmania has three. So there's a much more dense sales network and also the service network is much stronger. That raises the awareness of the marque.

  And the recognition that Volkswagen makes new cars. In WA, Volkswagen is still associated with the air-cooled Beetle.

• JH: It is definitely understated, particularly in W.A.

  Number 1; we'll do it with more advertising. Number 2; with more promotion cars at the airport, etc well do a lot more outbound marketing than has ever been done before. We can if and when necessary, we're opening a site out in Wangara in the next 6 or 12 months, there's no reason why we couldn't put VW next door, so I can create my own network of dealer points.

  That, coupled with what we'd like to do in the country. You've got to appoint service dealers in the country.

  I think what's happened in the past, without being critical of the other two dealers, I think that a certain criticism can relate to the people that are importing them too, I think they've been a bit moribund in proactive marketing and promotions of the product. That is the biggest single area that we need to concentrate on.

• BF: Finally; what role do you see the Volkswagen Club playing?

• JH: I'm not familiar with how it works.

  It could and probably should be a very important adjunct, support group if you like, to what we are doing. And we should and will get more involved with the Club from here on in.

To find out more about John Hughes, follow this link to the relevant pages on the "sattler online" site.