With Kylaq, Skoda Auto eyes larger global role for India
“We are looking at Kazakhstan and other countries in Southeast Asia but all this depends on free trade agreements/treaties. We also see North Africa — Algeria, Morocco, Tunisia and Egypt — as interesting markets,” Martin Jahn, Skoda Auto Board Member for Sales and Marketing, told ETAuto.
Egypt was initially seen as “the most promising” market but it has currency and monetary issues which has since affected the ease of doing business. Jahn was in India along with other members of the leadership team from the Czech Republic for the recent unveiling of Kylaq in Mumbai.
Incidentally, Skoda had announced last year that it was reentering Kazakhstan after a two-year break. It was present in this country between 2005 and 2021 prior to this. The new plan will see the company tie up with a local partner for assembly of the Octavia as well as the Kodiaq, Kamiq and Karoq SUVs. It now remains to be seen when the India-made Kylaq will join this lineup of brands in Kazakhstan.
Africa can wait
On the subject of global markets, Jahn said Skoda was not strong in South Africa unlike its group company, Volkswagen, and it therefore “does not make sense to go there”. The rest of Africa, including countries like Nigeria, also do not hold good prospects for the Czech automaker.
“We are successful in the Middle East, UAE, Kuwait..we are now looking at entering Saudi Arabia and Oman and can possibly export cars from India to these countries,” said Jahn. Skoda has already despatched CKD kits to Vietnam for the Kushaq and Slavia which were part of the India 2.0 initiative.
Russia was its most important market at one point in time till the war began against Ukraine. “We lost it completely and this was a market where we were approaching 100,000 cars annually. We had to write it off and Russia was a huge loss for Skoda because we were also responsible for the country,” he explained.
Ukraine, where Skoda has a small assembly operation, is “not working either” because of the war. The company is, however, “very strong” in Israel, ironically another country at war, where it is the top European brand. Thanks to the unrest in Europe and West Asia, logistics have affected volumes and things are “more challenging today as it is for everyone else”.
Supply chain pressure
Jahn said all these disruption had led to cost increases because “we have to double suppliers” thereby resulting in two sources which could be as distant as having one in Ukraine and the other in Morocco. “Yes, it is very difficult but you cannot complain.. if you have a rainy season, you have a rainy season…what can you do about it?” he reasoned.
Jahn conceded that with new entrants like the Chinese in the EV space, there would be fiercer competition to reckon with going forward. However, Skoda “continues to be strong” in its traditional European markets even while other brands are facing headwinds.
In emerging markets, the key challenge is cost control while maintaining quality. “The right price will ensure brisk sales of our products. Cost and price remain the biggest struggle sometimes,” he said. The company believes that it has overcome this challenge to a large extent with Kylaq where it has hit the sweet spot with an entry price tag of INR 7.89 lakh.
“It is a new era for us in India because we are entering the biggest and most important segment. We have to approach a completely new customer group in new territories because we are moving from urban to suburban areas,” said Jahn. As he put it, Skoda is launching a car with European technology and “beautiful design” in the fiercely competitive sub-four metre segment.
Formidable rivals
“We are bringing the best from Europe to make it appropriate for India. There are rivals to contend with and we are aware that we will not get anything free but we will do our best and it is up to the customer to decide,” he continued.
From Skoda’s point of view, it is just not the product that is affordable but also its parts and service which make it an attractive after-sales package too. “We are trying not only to bring a new car but also change the perception of the brand by entering the mass segment,” said Jahn.
The India 2.0 chapter offered valuable lessons for Kylaq, which is part of India 2.5, like getting the right fix on the entry right price and correct the perception that Skoda’s after-sales and service was too expensive.
Going forward, Skoda is aware that it will have to step on the gas in planning new additions and improvements to the car. There will also be a greater focus on new technologies and design along with launch hybrids and EVs. The electric space will likewise need a very appealing price proposition. Eventually, emerging markets will grow to account for a larger part of the carmaker’s sales which now have Europe taking up a lion’s share.
Never too late
Petr Janeba, Brand Director, Skoda Auto India, told ETAuto during the unveiling that Kylaq would “help us access a customer base which is bigger and continues to grow”. He said it was never late to enter the compact SUV space since the team had pulled out all the stops in delivering a top-class product.
“It is a sub-four metre that offers huge value. There is no compromise on safety and we will test the car based on Bharat NCAP,” added Janeba. The reference was to the new car assessment programme for India which was launched last year and especially relevant in a country which records the most number of road deaths annually.
According to him, India 2.0 was the right approach for Skoda after so many years of being around but had little to show in terms of numbers. “We made some iconic cars until then but in order to be a volume player and have a coverage of India in order to be a relevant brand, you must have deep localisation, local suppliers and deliver parts at a price which people are able to accept. In the past, we brought true European cars but the price and after-sales was always not at a level which customers could afford,” said Janeba.
With India 2.0 this perception completely changed and people who bought the Kushaq or Slavia now understand that it is a completely different value proposition now. “However, the brand is associated with being European and we are a little more expensive in service and after-sales. This will change with Kylaq which has more local content and we will also need to focus on greater localisation with EVs in three years,” said Janeba.
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