Skoda wants a pie of India's volume segment car-market

Localisation will help the company to drive cost down enabling cheaper cars

Czech firm Skoda Auto is aiming to make India its fifth-largest market, selling about 75,000 vehicles annually by 2023, driven by dealer expansion and new product launches. This is the target Skoda a sister concern of German automaker Volkswagen has set as part of India 2.0 plan which entails an investment of 1 billion Euro- the largest foreign direct investment in the automobile sector in the country. Skoda will drive the business plans of the group as part of the plan.

“Right now, the India market is 13th in terms of revenue, for us. I would like to see it climb to fifth position by 2023. That means increasing sales to 75,000 units from 17,387 units in FY18,” said Zac Hollis, director-sales, service and marketing, Skoda Auto India

As part of this plan, is readying up for a fight in the volume segment which the company feels would propel them to sell more cars of the country. Hollis who took charge of the India unit in November plans to revamp distribution channel to increase the reach of the company manifold and invest a bulk of the money in marketing and promotion.

“My job is to get the network of dealers ready and expand it and increase presence in other cities. We are going to double the presence from 50 to 100 cities. We have 63 outlets now; we will make it 130.

Many of these cities have very low brand awareness about Skoda product because they don’t see it on the road. We need to improve that. A big chunk of investment will be for marketing,” Hollis said in an interview.

One of the problems for the company’s lower market share has been its ability to tap the volume segment in the country. Volkswagen and Skoda put together currently have a share of less than 2% in the Indian passenger vehicle market of 3.27 million units a year. Hollis said primary focus on localising manufacturing will help to bridge the cost factor and at the same time maintain the quality of its cars.

“95 per cent of the material will be sourced locally. By that, we can be very cost competitive. We have started a discussion with local vendors. We can only be competitive in the mid-sized SUV segment through localisation as we reduce import duty tax on parts and components. But the quality we will offer will be the same global quality,” he said.

However, Hollis remains cautious when asked if Skoda which wants to portray itself as a premium brand would like to compete in the sub-Rs 10 lakh segment adding that as the first part of the plan, the group will be eying the bigger SUV segment.

“There has to be a careful balance, because most of the volume is in the sub-~10 lakh segment. But then, when you look at that segment, the business case becomes harder. It’s very crowded, much harder to crack. We are still discussing if we should be present in that’s segment,” he said.

The first Skoda plans to launch under the India 2.0 program will be in the category of mid-size SUVs in early 2021. The second one will be a notchback sedan.

Simultaneously Volkswagen is also increasing its production capacity in India and setting up a new design and development centre in Pune.