Skoda in no mood to quit India: Real story of future plans explained

Over the last few days, there have been multiple reports that Skoda is scouting for a local partner in India and that they are looking to divest some stakes as they aren't making profits due to the tough competition faced in the market. Social media is buzzing with claims that Skoda and Volkswagen might soon leave the Indian market in order to cut their losses.These are just two of the many speculations going around all over the digital world. That said, let's understand the root of these claims. It all came from a discussion with Klaus Zellmer, CEO, Skoda, wherein he interacted with a group of journalists where I was a part of that discussion so here's what actually happened.
Before proceeding let me just share the official quote by Zellmer, reflecting Skoda's plans for India.
”India is crucial to the growth strategy of Škoda Auto as we bring our broadest and most up-to-date product portfolio ever to customers. India, on its own, has huge potential, which we've seen by more than doubling our sales since 2021. It also gives us a competitive advantage for our international expansion strategy. Our development and manufacturing base in Pune is a springboard into ASEAN and the Middle East. The capabilities we have to build in India, for India, and related export capacity are helping us achieve new international sales beyond Europe. Soon we will add a new, locally developed model to our lineup in lndia in the important compact SUV segment. At the same time, we continue to consider other models for Indian consumers, including intensively testing our popular all-electric Enyaq in the country. EV penetration in India is expected to grow to between 15%-30%, and our global strategy is to offer customers the best of both worlds with their choice of electric or highly efficient combustion powertrains.”
Clearly, Skoda has a plan in place till 2030 and they are planning multiple launches by then. Most importantly, they are developing a sub-compact SUV for India that will be launched in early 2025. Now anyone who understands how the automotive industry works would know that developing a new vehicle is an extremely cost-intensive task. It's something that requires hundreds of crores or more than a thousand crores to be invested. Now if Skoda was looking at selling stake and leaving India to cut losses, the last thing on their agenda would be to develop an all-new model specifically for India. Makes no sense, right?

So did Zellmer speak about a partnership with another company? Yes, he did but he also made it clear that nothing has been firmed up yet and they're open to all opportunities that help the business. The mention of Mahindra being a partner is purely speculation. That said, Skoda is looking for a partner and the choice of potentials is not just limited to Mahindra or Indian carmakers but could extend to other players in the Indian automotive ecosystem.
He also made it clear that it hasn't been decided whether this partnership will involve selling stakes or will be a technical partnership or might involve bartering of products like Maruti and Toyota. "Anything is possible" is what he said when asked about the options being considered. Now whether a partnership is necessary or not is a story for another day when there are more details but I won't make the mistake of predicting the future of something that I don't even know as to when it will happen and how it will happen.
Hence, it can be said that Skoda along with Volkswagen has no present plans of quitting the Indian market. India has been a tough nut to crack for them but that has been primarily due to the brand's inability to understand the thought process of Indian buyers. I've said this time and again and it still applies to all European and US automotive brands that the smartest and most pathbreaking solution or the most important customer requirement in their home market might not mean anything to the Indian buyer. That's where they have struggled but what about their future?

When we spoke to Zellmer he accepted the shortcomings in the brand's understanding of the Indian market. He also mentioned that they seemed to have 'over-engineered' their cars in the wrong departments, which weren't critical for the Indian buyers. Inclusion of features, high VFM (Value-for-money) and a design that makes a vehicle look bigger than it is are some of the key things they are implementing in the new Skoda sub-four metre SUV, which is yet to be officially named.
Zellmer told us that the new SUV will have close to 77 or 78% of localisation and this has been done to make the pricing more competitive. This means Skoda now understands that Indian buyers won't be impressed with premium pricing in a vehicle that looks smaller than key rivals, offers fewer features and is still priced the same or more. If Skoda can develop the new SUV with these learnings and come close to doing what Maruti Suzuki and Hyundai, Kia are doing, I think their report card would look a lot better.
During our discussion with other senior officials from the brand, it was clear that they understand the importance of being able to react quickly to market dynamics. When asked about having just two mass-market models, the leadership team agreed that to be successful in India, the product portfolio needs to be more diverse. In order to achieve this, Skoda will also launch the updates of Kushaq and Slavia, thereby trying to enhance their appeal. Hopefully, the learnings that Zellmer mentioned will be carried into these updates as well.

Zellmer also told us that while Skoda is looking at achieving five percent market share in India by 2030, it also wants to have a share in the growing Indian EV market. Towards that goal, the brand will launch the Enyaq EV soon in India, which is expected to cost around Rs 50 lakh and will be joined by the upcoming Volkswagen ID.4 from the group. The brand will also consider new EVs costing less for the Indian market but quite frankly with these models the group will only have a namesake presence in the Indian EV space. Unless they develop a model for India, it's hard for them to grab anything that can be termed close to being a piece of the EV cake. Unfortunately, on that front, there's no concrete news right now.

That said, the analysis so far clearly suggests that Skoda isn't planning to leave India. The brand is big in Europe but it isn't a leading player in markets such as the US or China. India is the brand's largest market outside Europe and they seem to be committed to a long-term future for now. Will moves such as getting into a partnership turn out to be bad? Hard to say at this point but I hope it doesn't go that way. And to end this story let me share some great news. The fabulous Skoda Octavia VRS is coming to India soon and we've driven it so watch out for our review and let us know your thoughts on this entire episode in the comments.