Skoda, the car-maker owned by the Volkswagen Group, is taking aim at a segment that has been forsaken by most automotive players in exchange for the ever growing SUV and city SUV segments that have seen a boom in sales and popularity over the last decade.
The Skoda Slavia was recently produced into the market at a price that starts at ₹10.7 lakh (ex-showroom). At a notch below ₹11 lakh, the 1.0-liter TSI Slavia is cheaper than the top-end Hyundai Verna as well as the starting model of the Honda City which begins at ₹11.20 lakh.
For Skoda, the Indian market has historically been a receptive one that warmed up to its strong, solidly built cars that handled the bad roads well and gave drivers a diesel engine with high performance and fuel efficiency when it first launched some two decades ago. That first mover advantage was somewhat diluted when Volkswagen arrived a few years later and the average consumer, who wasn’t as well acquainted with VW, experienced some measure of customer disorientation on the differences between the two.
In recent years, the group has taken a call to let Skoda lead the charge into the Indian car market, even renaming it’s company from Volkswagen India to SAVWIPL or Skoda Auto VW India in June 2019.
While the last two years have been overshadowed by the pandemic, Skoda has seen a small metric of improvement in its sales on account of the midsize SUV the Kushaq and the larger SUV called the Kodiaq.
Zac Hollis who leads brand Skoda in India says, “New products are what pushes growth. We launched Kushaq at the beginning of last year. It's been very well received by the marketplace and by December we were selling 3,000 cars. So the Kushaq has done really well and remember, the midsize SUV segment is a very, very big segment, and we're currently approaching 10% segment share.”
“So this has been a resounding success for us. What we've been doing now, for the last three years, is preparing the business ready for that growth. You can't just take the business we had three years ago and expect it to grow by 140% and then to grow threefold in 2022,” he says.
The Kushaq isn’t the only car to add volumes. The larger Kodiaq also impressed consumers. “The new Kodiaq facelift with the 2.0-litre TSI petrol has surpassed my expectations. We launched petrol in a predominantly diesel segment, but yet I sold out the entire volume of 1,000 cars in 21 days for the year. I’m looking at negotiating more allocation for them,” Hollis said.
Where does that leave the Slavia which the company recently launched? Hollis says that the plan for Slavia is entirely a volume game. “We want to be a segment leader with Slavia, which means 2,500 to 3,000 cars a month. On that basis, we need to be competitive with the likes of current midsize sedans out there like Honda City and the Hyundai Verna.”
He goes on to add that the company will be particularly so with the 1.0-litre TSI to those competitors but the vehicles will remain “big cars with powerful and efficient TSI engines.”
IHS Markit associate director Suraj Ghosh says, "Skoda has pulled out the best from their quiver and the Slavia car looks new and refreshing. Also, its technology, in terms of infotainment, safety and telematics, is all up to date," he says."The company has brought it’s A-game to this car and the segment is a little vacant so it should do well."
Skoda has always been seen as makers of good cars but viewed as expensive to maintain.
Hollis says they have taken note of that feedback over the years, and reducing the cost of ownership has been an important part of the India 2.0 strategy. "If you've got 95% of a car localised, then of course, you've got 95% of the spare parts for the aftermarket also localized. So when you're working with local suppliers in India, then of course, you don't have input costs and duty to pay," he says. "This is the highest level of localisation we've ever had for any of our products in India. The Rapid was around 65%, as an example. So that level of localisation actually enables us to be competitive on cost of ownership." Skoda officials say the published figures for Slavia are ₹0.46 per kilometre in terms of cost of ownership.
Skoda's volumes for the calendar year 2021 were at around 23,800 which jumped from 10,000 the prior year. This year Hollis is bullish and hopes to trebel his volumes. “We will have a full year of cushion plus our parts and components will be in stock. Octavia, Superb and Kodiaq will obviously continue to play a role in 2022,” Hollis says.
Will there be a new hatchback like the erstwhile Fabia or a smaller SUV or electric cars?
Hollis says that Skoda made these two cars (Kushaq and Slavia) as part of the company’s 2.0 strategy. Driving the prices lower has been a function of local content. “What we've done is we have localised the platform. The platform is localised — the MTBA zero platform is localised. We have localised the 1.0-litre TSI engine, of course, the manual, and automatic gearboxes that come with it. The job now, for the future to continue to grow is to decide what's the right next body style. And that's still in discussion, because there are lots of things we could do. That's the great flexibility, this MTBA platform. But we haven’t decided that yet — it could be a hatchback, an SUV but we will bring more body styles on this platform,” he said.
He went on to add that the company will bring electric vehicles to the market. "My estimate is 25% of the market by 2030, in India, will be electric cars — the whole passenger car market, and we plan to play a part in that.
