Skoda Auto is gearing up to make a significant splash in the Indian automotive market with its announcement of entry into the compact SUV segment. Following the success of its mainstream models, the Kushaq and Slavia, both integral parts of the Volkswagen Group's 'India 2.0' initiative, the Czech carmaker is poised to introduce its latest offering. The global management team of Skoda is slated to journey to India later this month to unveil the company's strategic plans for market expansion.

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Internally referred to as 'India 2.5', the compact SUV project marks Skoda's return to the sub-4-metre vehicle category since the discontinuation of the Fabia in 2013. This upcoming SUV will share its platform with the Kushaq and Slavia, utilizing the MQB-A0 (IN) platform, also employed by its VW counterparts, the Taigun and Virtus. Benefiting from the lower 28 per cent GST slab reserved for 'small cars', the compact Skoda SUV is anticipated to be powered solely by the 110hp, 1-litre TSI engine, excluding the 1.5 TSI option found in previous 'India 2.0' models.

Expected to hit showrooms around March 2025, the launch of Skoda's compact SUV comes after a significant hiatus, primarily due to commercial feasibility challenges surrounding the 'India 2.5' project. Despite setbacks and temporary shelving, the project was resurrected following changes in Skoda's management, with the green light finally given for its development.

Notably, Skoda's venture into the compact SUV segment will proceed without Volkswagen, which has opted to focus on electric vehicles. However, potential shifts in market dynamics could prompt Volkswagen to reconsider its strategy, possibly leading to its own iteration of the compact SUV down the line. Economies of scale present a significant hurdle for Skoda, particularly without Volkswagen's involvement in the project. Nonetheless, leveraging shared components with the India 2.0 cars and a robust export strategy are poised to bolster Skoda's viability in the 'India 2.5' venture.

With the approval of the 'India 2.5' project, Skoda Auto Volkswagen is expected to inject fresh capital into its India operations. Moreover, a portion of the previously allocated USD 1 billion investment for 'India 2.0' remains available for deployment in 'India 2.5'. Skoda Auto anticipates an annual volume exceeding 90,000 units to cater to both domestic and export markets. Eyeing expansion in Southeast Asia, the Middle East, the Commonwealth of Independent States, and North Africa, Skoda is strategically positioning itself for growth.

In a fiercely competitive Indian market, Skoda's compact SUV will contend with popular models such as the Maruti Suzuki Brezza, Tata Nexon, and Hyundai Venue. As the largest sub-segment of the rapidly expanding Indian passenger vehicle market, compact SUVs accounted for over 25 per cent of the total industry volumes by the end of 2023.

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