Over-engineered car comes with a hefty price tag which is a big mistake in the Indian market: Skoda CEO
Skoda is likely to change its approach to the Indian Market. The CEO of Skoda, Klaus Zellmer believes that Skoda couldn’t set its footprints in India due to “over-engineering”. The term describes the process that produces cars that are more complex and expensive than the target consumer would need. Zellmer acknowledges that Indian customers, who are more cost-conscious, weren't a good fit for this strategy.
He emphasizes that building cars according to the Indian customers' preferences is crucial for success. The company's new lineup, including a sub-4-meter car set to launch early next year, aims to address these issues.
Zellmer stresses the importance of identifying and hitting the "sweet spot" in the market. This means creating cars that meet Indian customers' needs without unnecessary features that drive up costs. He believes that understanding what Indian consumers are willing to pay for and adjusting their offerings accordingly is essential. The goal is to provide better value than competitors in the same segment, thereby improving Škoda's market position. Zellmer is confident that the company's focus on quality, such as driving experience, fit and finish sustainability, and safety, will help them gain more market share.
One of the key strategies Škoda Auto is employing to become more competitive in India is increasing localization. This means sourcing more components locally and manufacturing more of the car within India. By doing so, the company can significantly reduce costs. Zellmer highlights that one of their engine derivatives is now entirely produced in India, demonstrating their commitment to localization. This strategy not only helps in reducing costs but also ensures that the cars are better suited to the local market's needs.
Škoda Auto's new compact SUV will be the third vehicle built on the MQB-A0-IN platform, which is specifically designed for the Indian market. This platform is significant because it marks the first time Škoda has developed a platform outside of Europe. It allows for the use of efficient engines and advanced safety systems tailored to meet India's stricter safety and emission standards. This focus on localization and compliance with local regulations is a testament to Škoda's commitment to the Indian market.
Currently, about 50% of Škoda cars manufactured outside of the Czech Republic are produced in India. The company is also looking to strengthen its export strategy for India-developed products. The new sub-4-meter SUV will have a high level of localization, around 75-76%, which will allow Škoda to take advantage of excise benefits and pass these savings on to customers.
This new vehicle will be produced on the same production line as the Kushaq and Slavia at the Pune plant, which has a combined production capacity of 270,000 cars per year for Škoda and Volkswagen. Škoda Auto aims to produce over 90,000 units annually to serve both the domestic and export markets, focusing on regions such as Southeast Asia, the Middle East, the Commonwealth of Independent States, and North Africa.
In Summary, Škoda Auto is learning from its past experiences in the Indian market and is taking significant steps to improve its competitiveness. By reducing over-engineering, increasing localization, and focusing on the specific needs of Indian consumers, the company is well-positioned to offer better value and gain a stronger foothold in the market. The introduction of the new compact SUV on the MQB-A0-IN platform and the increased production capacity at the Pune plant are strategic moves that highlight Škoda's commitment to the Indian market. As Škoda continues to refine its approach, it is poised to become a more significant player in both the domestic and export markets.
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