As Skoda prepares to launch its most accessible car, the Kylaq, the company is putting in place other pieces of its India 2.5 strategy, including network expansion, product lineup changes, and operational shifts.
21 Sep 2024 | 8158 Views | By Kiran Murali, Yukta Mudgal and Ketan Thakkar
As Czech carmaker Skoda Auto prepares to launch its most accessible car ever, the Kylaq, in coming weeks, it has also set in motion a business-wide series of changes to reorient its operations in the country, including its partners. The changes, part of its India 2.5 strategy, are targeted at ...
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As Czech carmaker Skoda Auto prepares to launch its most accessible car ever, the Kylaq, in coming weeks, it has also set in motion a business-wide series of changes to reorient its operations in the country, including its partners. The changes, part of its India 2.5 strategy, are targeted at gearing the company and its partners to move to a volume game from the niche play they have been accustomed to in India.
The Kylaq sub-compact SUV is the Czech brand’s attempt to move out of its traditional sedan and premium focus into the mainstream category and emerge as a major player in the India of offset its withdrawals from other global markets. The Kylaq, slated for launch early next year, will be Skoda Auto’s first sub-four-metre model since the Fabia, which was discontinued in 2013.
However, the revamp strategy is not confined to the introduction of the new model. Besides the launch of models such as Kylaq, it involves several other parts, including reorienting the the existing Skoda line-up, expanding and refocusing the distribution network and tweaking the marketing strategy. Recently, the company introduced new, more affordable Monte Carlo and Sportline editions of its Slavia and Kushaq models.
“We cannot be a brand of one car,” says Petr Janeba, Skoda’s Brand Director in India. “We must correct our position in the rest of the range to make the brand more accessible. Kylaq will transform into volumes. But the other models also need to contribute because the dealers in Tiers III and IV need to be able to sell the whole range of Skoda,” he said.
To this end, the company intends to utilise its Indian engineering arm more actively to bring in upgrades and refreshes like the Monte Carlo and Sportline editions. “In India, we will be much more active in the future...In the past, we did action models, which were just colors and some accessories. But we need to do more. This Sportline [for Kushaq] is an example of how we can do something more,” he said. At the same time, he said, the company doesn’t want to shorten the lifecycle of its products.
Network Augmentation
The second area of focus for the company is on its network capacity. To really become a volume brand, both Skoda’s operations and imagery have to be modified, Janeba pointed out.
The company is rationalising the current network based on performance and expanding the footprint to new cities. The automaker has plans to increase its sales and service touch points to around 350 from the current 260 to support the sales of the new affordable model.
“We will increase our network dramatically with the Kylaq,” Janeba said, pointing out that many of its dealers are not used to playing the volume game. “The Skoda India network started with the Octavia and has been selling premium cars with premium margins. Now, before Kylaq comes, we need to teach them how to behave as a volume player.” In the new paradigm, he pointed out, dealers need to sell in volumes.
“If they don’t make volumes, their margins get lower, especially in the sub-4 metre segment. There won’t be many opportunities like they have on Kodiaq or on other low-volume cars which are given high margins. So we need to take care of the skills and abilities of the network before they add Kylaq,” he said. The company has brought in Vishal Bhat, an experienced hand from within the VW group to head the sales role for Skoda Auto. Bhat has a year of understanding of the dealer network and vehicle servicing — elements that have been Skoda’s weaknesses over the years.
EV Strategy
The company has an aggressive push on electrification across the globe. But in India, it is recalibrating its plans due to the slowing growth in the segment. Moreover, the attempt to move into the mainstream of the market by making the models more affordable will also reflected in the EV line-up.
Skoda will introduce a new facelifted Enyaq in India in March 2025, while a locally assembled Elroq EV will follow in the second half of 2025, said Janeba. It also has plans for a fully locally manufactured electric vehicle. Janeba said the company is in the final stages of defining the vehicle architecture and product to be introduced in the Indian market will have a global play.
2024 Performance
Janeba is candid in admitting that despite double-digit growth this festive season, Skoda Auto India’s sales in 2024 are likely to slip into the red annually. “We are not growing this year because we are catching up. [There are] some things to bring and some things to transform.
However, with the entry of Kylaq, Janeba is extremely bullish and expects sales to cross 1 lakh units by 2026.
The automaker sold 46,076 units in FY24, including exports, and had a market share of around 1% in the domestic market. Thanks to the expanded range of Kushaq and Slavia, Skoda Auto expects double-digit growth in the festive season.
This market witnessed two consecutive months of decline in 2024 after strong, excellent years of growth post-Covid-19.
Janeba believes that exports from India have the potential to double in the coming years and that the number of markets it currently serves will also grow significantly.
Skoda has a long-term vision of capturing over 5% of the market by the end of the decade. The company is focused on laying new foundations to accelerate its market share and become a more active participant in the third-largest auto market in the world.
This feature was first published in Autocar Professional's September 15, 2024 issue.