Is Skoda India Simply Being Clever or Does It Have a New Plan?

Skoda Auto and Volkswagen to invest 1 billion euros in India to set up a new plant and make new cars locally.

Skoda India will launch two new products starting 2021, starting with a mid-size SUV. 

Photo: The Quint

"Skoda India 2.0" read the invite. This Czech company, a part of the Volkswagen Group, seemed to be onto something big. This wasn't your run of the mill car launch conference. The top brass of not just Skoda India, but even its global CEO and members of the board were down in New Delhi for this conference.

The announcement: Skoda India and Volkswagen Group to invest 1 billion euros or Rs 7,900 crore in India upto 2025, setting up local manufacturing and launching products with upto 90 percent localisation. All this, for Volkswagen and Skoda to jointly gain a 5 percent share in the Indian market from the less than 1 percent currently. 

The 1 billion euro investment is just a part of the plan. Skoda India will also launch two new products - a mid-size SUV in 2021 and another vehicle after that on the MQB A0 IN platform (that's a localised version of its global MQB platform). Not just that, Volkswagen too will launch two new cars on the same platform.

Skoda Auto management team announcing the 1 billion euro investment in India. Photo: The Quint

What this means for Skoda car buyers

Getting to a 5 percent market share for Skoda is going to be quite a task, given that it sold just under 17,000 cars last year. The best-selling product has been the Skoda Rapid, but Skoda says demand for the Kodiaq is also pretty high. Skoda sold just 750 Skoda Kodiaq SUVs, but it says it has a waiting period of nearly a year!

Our delivery times are simply too long. I admit the Volkswagen Group has struggled to achieve its targets in India. We have identified three factors for that. 

Bernhard Maier, CEO, Skoda Auto 

According to the company's global CEO, Bernhard Maier, Skoda and the Volkswagen Group have identified three factors that they need to address immediately. The first is customer satisfaction. Skoda has been getting many complaints about service standards, which it plans to address.

Second, it plans to reduce costs and "localise production in line with Make-in-India". This means, it is investing in its manufacturing facility in Aurangabad, sourcing components locally to achieve a 90 percent localisation for its upcoming products.

Third, is timing. It needs to keep pace with trends and hence its first locally manufactured product - in India, for India - will be a mid-size SUV in the later half of 2020. This SUV will also be exported from India to other countries.

We will make the new products on a localised MQB A0 platform, which fulfils the strict emissions and safety standards that will come into force in India in 2020. 

Gurpratap Boparai, Managing Director, Skoda Auto India

What this means is that Skoda car buyers can look forward to maintenance costs coming down as localised parts are likely to be cheaper than the imported components it uses now. Buyers can also look forward to at least two new products from Skoda and Volkswagen.

The company also said it was planning to launch 10 electric cars by 2025 globally. However, it would wait and watch for the demand in the Indian market before deciding to launch an electric car in the country.

Could this be acche din for Skoda? Or is it just a "simply clever" plan? Let's wait it out.