Volkswagen India plans to “re-align” Brand Skoda

The Volkswagen group first entered India’s car market with the Skoda brand in 2001, and set shop at Aurangabad, Maharashtra. The Volkswagen brand came into India six years later, in 2007. Although Skoda has had the first mover advantage among the umbrella of Volkswagen car brands in India, the Czech-origin car maker has suffered a poor reputation for after market service, a make or break factor in the Indian market.

Although Skoda produces cars that are great to drive and that are packed with technology, the brand’s poor after sales service has dented its reputation, leading to poor sales. Now, Volkswagen is dropping hints of going slow on Brand Skoda in India. The first signs of these realignment became apparent when Skoda discontinued the dud-selling Fabia hatchback in India.

Also, the Czech brand did not introduce the TSI turbo petrol engine and DSG dual clutch automatic gearbox on the Rapid, its best selling car model, even though the engine-transmission combination was on offer in the Vento sedan. Furthermore, Skoda India’s top management began talking about taking the brand upmarket rather that focusing on the mass market.

These factors, along with Volkswagen India’s latest talk about “realigning Skoda’s strategy for India” indicates that the foot may be off the throttle as far as Skoda and the Indian mass market are concerned. Mr. Mahesh Kodumudi, the India chief of the Volkswagen group has made the following comments about Brand Skoda and the way forward in India.

We are re-aligning our Skoda strategy… we are looking at it. May be, it is not necessary to be a mass-market brand all the time. That kind of rationalization is going on, though no decision has been arrived as yet. If you are not profitable, it does not make sense in making products and selling at loss. So, we have to decide which products are to be sold in India and which ones have to be moved out. (This) rationalization is going on. 

However, there are no plans for Skoda to pull out of India or scale down operations in a big way, as say Mitsubishi. Going forward, expect Skoda to remain a niche player in India focusing more on luxury cars such as the Octavia and the Superb rather than big volume products such as the Fabia and the Rapid.

As things stand today, Skoda India contributed just 1 % of the automaker’s global sales with 910 cars sold in India during May 2014, out of 91,000 cars that Skoda sold globally in the same period. Skoda India’s product overlap with that of Volkswagen and the shoddy after sales service aren’t helping matters either. With the latest word about Volkswagen planning to “re-align” Brand Skoda in India, car buyers’ confidence in the Czech brand could be further dented.

Via TheEconomicTimes