Skoda Auto Volkswagen commences feasibility for next phase of investment in India

The Indian subsidiary of Volkswagen Group, Skoda Auto Volkswagen India has started a feasibility study for the next phase of its investment in India.

During my interview with ET’s
Ketan ThakkariPiyush Arora, newly appointed MD, Skoda Auto Volkswagen India Pvt Ltd, said that since the parent company empowers India, it is creating a blueprint to play a bigger role not only in the Indian car market but within Volkswagen as well.

Arora explained that the group is slowly building synergies by harnessing local expertise through engineering and localization, and building a foundation for India’s growth. The key mandate that Arora has ahead is to build a sustainable and profitable business model with India 2.5-3.0 plans, which will play a key role in electrification.

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Tell us about the change from Mercedes Benz to Skoda Auto VW?

It was a great opportunity for me to move from a premium luxury brand to a group that has a broad portfolio and ambition to grow.

I could see that there was a definite desire to get into this market with the India 2.0 strategy and make it a segment from the VW Group. I see this as a huge opportunity. The VW Group has evolved in terms of governance and structure and how they lead the market as a sector to drive growth. Skoda is the leader in the Indian market for all group brands and regional responsibility, has a very clear focus and mandate to grow in this market.

What is your mandate from Headquarters?

The mandate is to make India a free, solid region. While headquarters has a role, one cannot run the strategy without meeting the unique need of the market. VW Group’s new auto strategy is primarily driven by the current transformation that the automotive industry is going through and all the brands in the group must undergo transformation in the right markets (in terms of electrification) at the right time. The key to the INDIA 2.0 strategy was to manufacture or manufacture the product in India not only for India, but also for the world. And when we say we have regional, we also have to reach out to the markets of the regions, be it the Southeast Asian region, the African region etc.

We will take more responsibility on development, whether for a change in model year, facelift or new products in the future – which will help to meet market needs quickly. As part of this plan, localization is an obvious strategy. The local engineering center assists in the execution of the localization plan. Personally, the second priority for me right now is to make our operations more profitable and move in a direction where we can drive sustainable profitable growth. At the same time, we are expanding our network footprint to reach out to a greater customer base. Our touchpoints have grown by 25 percent to 500 in 2022.

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The next phase of 2.0 is on export?

Our responsibilities will continue to grow as we demonstrate our capabilities to HQ to build their trust in the team here. For export market assessment, we are in the process of creating a team here within the group, which will then coordinate with various brands. This team is responsible for coordinating with brands at the headquarters for their overseas plans for the region.

Responsibility for global sales entry may still reside at the headquarters. What we will establish here is to facilitate and coordinate rapid execution within our internal departments. This will expedite decision making so that we can respond to customer needs and capture the market faster.

On VW Group’s EV strategy in India?

We have started our electrification journey; It is a top to bottom approach. Our efforts with the Porsche Taycan and Audi e-tron have been very successful. We are looking to expand our portfolio and study relevant products for the Skoda and VW brands. We are evaluating our global products that can be brought here in the form of parts and components. At the same time, we are aware of India’s aspirations of electrification and we cannot stay out of it. So, we are evaluating opportunities to see which product we can bring to India with a high degree of localization. As we move forward, we’ll look at those opportunities and those that may or may not actually be possible.

While it is still early, there is a serious consideration. But to say that it is not on the table is also not correct. That we are so far ahead on that would also be an exaggeration.

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With diesel ruling, what are the prospects for hybrid and CNG in the future?

The group has a clear mandate to move directly from internal combustion engines to battery electric vehicles and not look at hybrids.

India also wants to move forward on that path. As a stop-gap, it can be beneficial, but it has to be ultimately valuable to the customer.

We are more inclined towards BEV (Battery Electric Vehicle). In India, like the rest of the world, the EV transformation is taking place at a very rapid pace.

Typically, ICE market share decreases and EV share increases. But India offers a unique opportunity where both ICE and BEV will grow together. So you have to be busy with both. Not that in 2030, our internal combustion engine (ICE) numbers will inevitably decrease.

Unlike Europe, where ICE will go down, in India it will go up. Therefore, you cannot lose your focus on that market, as it is still a growing market. Additional growth will come and faster growth will come from BEVs, maybe that’s a fact, but still, our ICE market (3 million) will also grow. This is my thought process and my strategy too, aligns with the group that we have to focus on both the opportunities in India. It cannot be one or the other. So India will take that challenge in a market where multiple technologies will be developed at the same time.

An alternative like CNG is a part of continuous discussion and evaluation. CNG makes more inroads into the fleet segment, which is no longer an area of ​​focus.

We have just completed our India 2.0 portfolio. Now, we need to start penetrating and increasing our market share. If there is demand for that (alternative fuel), we will definitely evaluate it.

How do you view the intensity of competition in the market with VW Group’s product portfolio strategy?

Our expectations from the Indian market are different from our high-share rivals. Not to say that we don’t want to play that game, but the fact is that our focus is on more profitable growth. We are eyeing 5-7% market share. And I’m confident that with our current product portfolio and what we’re evaluating going forward, we’ll be able to improve that.

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Taking into account the available resources, we will develop accordingly. To be able to say that we can bring out a new product every six months would be more than our approach — because we have aspirations, which is to gain market share first and become profitable.

I believe we have more opportunities to grow over the next 10 years, but on a profitable path and that focus will remain.

Opportunities for new products are being evaluated and will be introduced in due course. We are in the process of conducting a feasibility study. Of course, we have started the ground work on both the fronts, but the timeline etc. will become more clear over the period of next few months.

Can you tell more about the tie-up with Mahindra?

The vision is well aligned for both the partners. This fits into the group’s new auto strategy of de-carbonization of mobility in various markets. This association includes the parts and components that can be used so far. Volkswagen Group has this great platform, MEB, which can be used for many products and is proven globally.

Can it help the group in the long run?

So, of course, once we finish our EV strategy and by that time further work on the group strategy with Mahindra, it will ultimately be beneficial for both. But it is too early to say anything in this direction.

On the need to cash in on CKD imports?

India needs those high quality premium products, and will have to focus on that going forward. I’m definitely promoting and looking at that part of the strategy more actively.

The challenge is on the supply side. Looking at the supply situation today, there is more demand than supply. And for parts and parts business to flourish, you need backend support from mother plants.

The rub-off effect from a customer standpoint is very high on the premium to volume model. There are companies that are taking good advantage of this strategy.

We are working on expanding our parts and components portfolio (CKD) across all three brands (Skoda, Volkswagen and Audi).