"From a business perspective, it's not always wise to stand on only one leg," the Skoda Auto CEO noted.
30 Jun 2024 | 5949 Views | By Prerna Lidhoo
Skoda Auto says that its commitment to the Indian market is set to take centre stage, as Volkswagen group's Czech brand primes to launch its first sub 4-metre SUV early next year. This renewed focus comes primarily in the midst of Skoda's fading presence in two major markets, Russia and China, ...
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Skoda Auto says that its commitment to the Indian market is set to take centre stage, as Volkswagen group's Czech brand primes to launch its first sub 4-metre SUV early next year. This renewed focus comes primarily in the midst of Skoda's fading presence in two major markets, Russia and China, effectively forcing the company to shift its attention to India.
"From a business perspective, it's not always wise to stand on only one leg," Skoda Auto CEO Klaus Zellmer explains. "If it gets a little shaky, you want to stand on the second leg, which for us is India."
Due to intense competition from local players, the company is planning to phase out from China and had to quit Russia recently after taking an almost $742 million hit from the impact of the situation in Ukraine. "We're a 129-year-old company and yet last year was our best year in absolute Euros. Outside Europe, our most important venture is India, because this is the place to be, going forward," he adds.
He hopes that the company's compact SUV project--India 2.5--will help it garner 4% market share at a group level by 2026. According to FADA, the Skoda Auto Volkswagen group which includes Skoda, Volkswagen and Audi AG brands, sold 88,412 units in FY24 and has a market share of 2.24%. "With the sub 4 metre we want to significantly increase our market share in the most demanding segment which comprises more than 50% of the market. I'm convinced that it had hit the bullseye in terms of its technology and, fit and finish. We will prove we (do) listen to the market, especially in terms of its pricing," Zellmer said.
The compact SUV has become the biggest sub-segment of the fast-growing Indian passenger vehicle market and accounted for over 25% of the total industry volumes of over 1 million units at the end of 2023. The upcoming model will be pitted against the Maruti Brezza, Kia Sonet, and Tata Nexon, priced between Rs 8 lakh to Rs 15 lakh.
Pricing will be key for the company to make a mark in the segment. "Nobody wants to end up in a price war. We want to make sure the car is worth its price value and we're trying to hit that sweet spot. I don't think we're too late to the segment," Zellmer added.
The Skoda compact SUV will be a shortened sibling of the Kushaq that was launched as a part of the Volkswagen Group's India 2.0 plan along with the Slavia. It has already invested one billion euros between 2019 and 2021 into the Indian market, and he believes the company is now on the right track.
"We became really serious about the market when we launched 2.0, and those cars are doing reasonably well. In two years we've sold more than 100,000 cars for Skoda. "This year is a very special year for us because we're ramping up at the production side. At the same time, we're onboarding more dealers. I would also wish for more sales but 2024 is a little bit of a bridge year and then we're going flat out in 2025 by ramping up the business model and investing heavily to increase our output," he said.
Currently, the company has 250 touchpoints and wants to increase it to 300 by the end of the year. Additionally, it's also important for the company to use India as a hub for ASEAN region. The company will soon start producing the Kushaq by the end of the year in Vietnam. "This is the perfect example of engineering and sourcing in India and delivering to other parts of the world. We're already exporting cars to Saudi Arabia as well," he adds.
While Zellmer accepts that India has a predatory car environment, he also knows that it's also the one with the most headroom for growth. "We're no. 4 in Europe and we're going to take that success, strategy and portfolio, depending on what makes sense to the Indian market. We're still learning, and humble, and we're willing to be totally customer centric," he said.
Having said that, Zellmer certainly hopes that the company's new compact SUV won't meet the same fate as the Fabia hatchback, which was launched in India in 2008 but was soon discontinued due to declining sales and an unaffordable cost structure, among other factors.