Skoda Says No To Budget Cars; CNG A Possibility

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Skoda is in the driver’s seat for Volkswagen Group in India, but where is the brand headed in the country? In a chat with Zac Hollis, Director, Sales and Marketing for Skoda India, we get a glimpse at the new products, new strategies and ambitions of brand Skoda. One thing is for sure, the much-loved Czech brand is looking to shake things up and give Indian car buyers what they want.

Q: Having worked in China, how do you compare India? And the future here?

ZH: So, from a business point of view, I think there’s real potential in India as well. If you look at China, there are 120 car brands, while Europe has around 30-35. In India, we've got like 15 different car brands, and the market is dominated by two or three really big players. In the future, the influence of these players will reduce, and more players will come into the picture. The market will become much more mature and competitive. It will be interesting to see what happens in the Indian market over the next five years.

 Q: So what are Skoda’s plans for the next five years? When do we see the first product?

ZH: The world premiere for the SUV in India is slated to happen in 2020, and customers can start buying it in early 2021. Then, right at the end of 2021, we will launch the notchback.

 Q. VW and Skoda have shared products in the past. The SUV and notchback will also be shared. Aren’t you worried that customers will be put off by the similarities?

ZH: The product differentiation will be starker than today, for sure. It’s a massive change. The engineers and designers have done a fantastic job of differentiating the cars. The interiors, particularly, look completely different.

 Q. The product pipeline will suggest the level of aggression. MG has announced five cars in two years. Kia will bring five cars by 2022. What can we expect from Skoda?

ZH: I would love to be able to tell you exactly which products are coming. But, keep in mind, we still have the Superb, Kodiaq and Octavia, and new launches will extend the portfolio to six. We are very close to having the Karoq in the Indian market now, by early 2020.There will be two more products, and this is just the beginning. But, there will be many more on the same platform in the future. That’s the key message.

 Q. Along with cars, will Skoda also need more showrooms to make an impact?

ZH: As part of India 2.0, we will spend the next two years doubling the sales numbers we have in the country right now. We currently have 64 outlets in India, and that will go up to 138. We will be adding dealerships in tier two, three and four cities too because we will have cars with better market potential in these cities. At the moment, with our product portfolio, it wouldn't make much business sense to have dealers in these cities. But with India 2.0, it makes perfect business sense to have dealers there. So this is why we're expanding our dealer network.

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 Q. So Skoda won’t be taking Maruti and Hyundai head on. It is said Skoda won’t go below the Rapid in India?

ZH: I wouldn't say I'm 100 per cent (sure) on that. I think the discussion is - is it right for the brand to go below the Rapid? To do that, we'd have to come way below the Rs 10 lakh mark, say Rs 5-7 lakh. And it's a very competitive environment, you know. That's not where the brand belongs. No one would want to buy our Octavia and Superb if we sell a Rs 5 lakh or Rs 7 lakh car beside it. Which is probably what's happening with Volkswagen.

 Q. VW and Skoda have had clashes in India about brand position. Will Skoda become the more frugal brand here, like in other markets?

ZH: In many markets, the price difference now (between Skodas and VWs) is very, very close. Skoda has really differentiated itself in the market by being simply clever around spaciousness, roominess and value offering. In India, Skoda has this unique positioning of being a value-luxury proposition. My plan is to keep that value-luxury proposition going forward, for India 2.0 as well. Almost 80 per cent of the Kodiaq's sales come from the L&K variant which means people are willing to spend that kind of money on premium brands.

 Q. So will Skoda be more youthful?

ZH- Skoda is going to focus on design and value. And that's how the positioning will continue to be going forward. We're not going to decide who's higher and who's lower. I think the consumer will have to decide that.

 Q. Service and trust have been stumbling blocks for Skoda in India.

ZH: We currently have four years of extended warranty and we are the first brand in India to offer that. And now, the customer can purchase another two years too. It really makes the buyer confident about the product, even from a six-year ownership point of view.

 Q. That confidence building starts with service experiences and the dealer..

ZH: So, the next thing that I'm doing is I'm working with the dealers. I won't tolerate dealers that don't live up to the expectation in terms of service. And I won't tolerate dealers that aren’t being fair and transparent to customers. I won't tolerate that any longer. Because our brand reputation can be destroyed by two or three experiences or two or three dealers.

 Q. There is a lot of focus on cleaner drivetrains. Are hybrids the way forward for Skoda too?

ZH: The market is moving more towards petrol. In fact, Europe has transitioned to petrol very quickly. It surprised everybody. In fact, it's causing big problems as we have a shortage of petrol engines across all of our production facilities.

So, I can see India also moving towards petrol as the cost of upgrading diesel engines to BS6 is very expensive. Other competitors are doing it too. But you'll see a significant rise in prices of diesel cars as we move forward. And that's going to reduce the market for diesel even more, because the business case for buying a diesel will only become weaker.

We have hybrids in Europe, and we will introduce the tech in the Superb and Octavia too. But there's not enough capacity for the demand in Europe. So, it's unlikely that we will bring the hybrids into India. But, instead, we are seriously considering CNG. The government has also put their money behind CNG in the short to medium term. For the long term, they're investing in electric vehicles like most markets. The government has also confirmed that it will increase the number of CNG filling stations from 1,400 to 10,000. When that happens, and when brands like Skoda start introducing CNG options, the market acceptance of CNG will also go up. All manufacturers have to meet average CO2 emissions as per the CAFE Norms, in 2022-23 and to do that, we will need to look at alternative fuel technology. We have no choice.

Q. What about the car buyer? Will the pricing be competitive?

ZH: Our cars will be competitive because we will be competitive. But our cars will also be high quality, very premium in terms of the design and interiors, but they will be competitive. I can't meet my volume targets unless I am competitive. So our cars will be absolutely competitive.