[pqr]

Skoda’s international market woes : China meltdown | 36% De-growth in the Indian market | Looking for a local partner in India?

Skoda China meltdown



Skoda Auto a.s. globally posted its best sales in 2018, with China contributing 3,52,000 units, or nearly 27% of sales. In 2023, when EVs became a hot potato in China, Skoda sold a mere 22,800 cars in China; that's a 94% sales wipeout in the last five years.

Skoda’s de-growth in Indian market



After much struggle in India, Volkswagen passed on the baton to Skoda in 2018 to develop and sell cars. The first crossover product named Kushaq under the India 2.0 project was launched in mid-2021; this was followed by the Volkswagen clone Taigun. Later in 2022, both brands have launched sedan products in an already diminishing sedan segment.



New crossover products received a lukewarm response at launch, and sales for Skoda in India have been in continuous decline since 2023. Currently entire lineup of India 2.0 project is available at huge discounts.



What Skoda did in between was change the underperforming expat sales and marketing heads, who are also responsible for product definition and pricing strategy. Skoda’s sales and marketing head positions as well as product planning head positions have always been occupied with expats since the beginning of their so-called India 2.0 project, who mostly have no clue about the Indian market’s ‘need’ and ‘want’. And there lies the problem, as all eastern brands (Maruti-Toyota, Hyundai-Kia, Nissan, and Honda) have reserved these positions for Indians, as locals know local market demand better.



With a sales crash of 36%, their most recent expat sales and marketing head, Petr Janeba, has delivered even worse sales results in the last three months. Especially when the Indian passenger vehicle industry is still growing at 12% in Q1 2024. Moreover, Volkswagen, with a similar product line-up, has suffered only crossover Taigun sales decline.



What Skoda always needed in India was a turnaround Indian specialist at the helm of sales and marketing who knew the Indian market well and could become a strong voice for customers. Two recent examples that instantly come to mind are Rakesh Srivastava (retired now), who was able to run Nissan on a single wheel (single product - Magnite), and an automotive industry outsider like Rajan Amba, who has supercharged Tata Motors sales ever since October 2020. His charisma can now be seen in JLR India’s sales performance as well. And not someone like Saurabh Vatsa, under whose leadership Citroen just failed to pick up in India.

2025 Sub-4m crossover launch



Recently, Skoda India announced that they are going to launch a sub-4m crossover by March 2025, built on the same MQB 27 IN platform. Now there is a big chance that this new product will badly cannibalise their existing products—the Kushaq and Taigun 1L engine options—as they are already small compared to other sub-4m cars in terms of width and height.

In 2024, when Kia Sonet and Tata Nexon are already in the arms race of feature addition in this segment, has Skoda developed enough new features to survive the cutthroat competition? Will they be able to price it right this time?



Safety and driving dynamics can’t be the only USPs in this segment for Skoda to live on. Tata Nexon has better crash test ratings than Skoda Kushaq under the new GNCAP protocol, and Mahindra XUV 300 (an upcoming 3XO) with a 1.2L TGDI engine also has sorted dynamics and performance due to SsangYong Tivoli’s underpinning. And not to forget that this segment offers diversified fuel options (12V mild-hybrid/diesel/CNG/EV), having low running cost, to Indian customers, which Skoda doesn’t have!

Future – searching for an Indian partner for capital infusion?

Skoda’s India story is now turning out to be similar to that of Ford India. Ford, with their billion dollars, has gone for cheap products, failed, and ended up looking for financial partners in Mahindra around 2019.

So are the current rumours going around Skoda. After struggling to sell newly developed products in the last three years, they don’t know where to go.

As per information circulating around in the investment banking circle to be believed, as a de-risking strategy, they are looking for an equity-partner to infuse growth capital for an upcoming EV project and a new MQB 37 platform to completely replace MQB 27 IN, so as to underpin a bigger car for the next generation of India 2.0 products. Platform-sharing talks are still open with Mahindra as well as the SAIC-JSW combined entity.

If anything fails further from here, Skoda will be on the path of Ford India.

[avira_tk]

The reason is the lack of a diesel, these cars are best suited for it, verbal gymnastics every quarter doesn't change reality. A 1.5 diesel in manual and automatic will solve the volume problem in short order. This whole dieselgate issue is blown out of proportion, other than some green lunatics and champagne socialists, no one cares about some particulate matter that is a byproduct of efficient combustion.

[Venkatesh]

Skoda Auto delivers 866,800 vehicles worldwide in 2023.

Infographics

[GTO]

In India, the group broadly has 4 volume products.

Kushaq & Taigun: Both excellent crossovers, but they were priced higher than expected. Plus, the two look smaller than direct competitors. The Kushaq is now a 3-year old product & facing even more heat from newer launches = the Creta Facelift, Seltos Facelift, Grand Vitara & Hyryder etc. These direct competitors also offer either a diesel or a fuel-efficient hybrid.

Slavia & Virtus: Both have been mostly around the 1500 sales / month mark. It's a tough market for sedans, but the two are giving a great fight to the Verna & City.

Together, as a group, VW-Skoda do 7000 - 8000 cars / month which is healthy & sustainable. But not excellent. They're going to need frequent product updates to keep the momentum going.

[Hattrick]

Skoda's products are good from the fundamental perspective (build, engine, driving manners, safety), however, their pricing strategy versus the variants they offer needs rethinking.

The number of Skoda cars sold during festive or year-end season is a testament that people still want to buy their cars, but for a better pricing. If they could manage to provide best value for money (like earlier Ambition) variants at a competitive price, then they can come back to the game.

[Maky]

Originally Posted by pqr

Skoda’s de-growth in Indian market

Attachment 2590858

To clarify are you comparing an entire Calender year 2023 sales to current Quarter Calender 2024?
or is it a 36% decline Jan-March 2023 to Jan-March 2024 comparison?

Thanks.

[ssoni.1411]

VW-Skoda need to update their current portfolio and bring in fresher updates of their existing models. They have been in India for too long and at least by now they should understand the market sentiments, how can you launch a Creta competitor without a panoramic sunroof and other feel good features. Also, they need to revisit their pricing strategy. If you are going to clear the stock with discounts, why not reduce the ex showroom cost and sell it?
I am a big fan of their cars and engines, plus the 5 star safety that they've achieved is phenomenal. They just need to revisit their strategies and people will be willing to buy their products.

[Kosfactor]

Originally Posted by avira_tk

The reason is the lack of a diesel, these cars are best suited for it, verbal gymnastics every quarter doesn't change reality. A 1.5 diesel in manual and automatic will solve the volume problem in short order. This whole dieselgate issue is blown out of proportion, other than some green lunatics and champagne socialists, no one cares about some particulate matter that is a byproduct of efficient combustion.

Trust maybe a bigger problem - if they cheated with emissions , what else have they compromised? This may not be a problem with another brand but VAG who already had given a bitter taste to the consumers with their lack of reliability & durability.

One thing I have noticed is that those who who are looking for a second car for family members , their question is if Maruti has compromised on safety, what else have they compromised?! So this is not a witch hunt against VAG as such.

Those who need a diesel for the long run won't take VAG for its poor reliability and durability (perceived or otherwise), it's a liability

In terms of turning a brand around , lots of money to be made for executives but who would risk their career with this, not sure.

[dkaile]

I have been living happily with my Skoda Superb MK2 2012 6MT model since the last 12 years. My son goes to Ireland and buys the top spec Skoda Scala. We both are living happily ever after... lolz... pun intended. But on a serious note, Skoda has such good products which offer such tremendous value, space and build quality, there is certainly something seriously wrong with their management here to not get going.

My tips -
There should be entry level trims of Kushaq and Slavia, which they had launched earlier but since withdrawn, to capture the mass market. They offered exceptional value unlike the costlier trims of today. They have to compromise on their 'profit only approach' to get a strong foothold in our market.

Cheers...

[Zinger_Winger]

They really, really need to go back to the drawing board and come up with a Diesel engine for India. Going the MSIL way of completely boycotting diesels isn't for them.

Also, after Zach's exit from India, there are multiple reports of the service experience going back to the dogs. The two Petr's just seem to be thorough bean counters and don't seem to be having the 'India' acumen nor do they have any on-ground footwork and PR/Social media presence, like Mr. Hollis did; eroding back all the customer trust that was created basis the critical on-ground footwork that their very visible predecessor had accomplished.

P.S: Whenever I see a Kushaq/Taigun, I feel sad at the road presence of those vehicles. They just look like hatchbacks and not (pseudo)SUV's. VAG probably also need to rework both those models to have a bigger, more butch stance on the road. Like they say in hindi "Jo dikhta hai wo bikta hai" (Translation: Only that, that is visible is sold). It seems like a pointless exercise working to launch a sub-4 meter vehicle, when your existing >4 meter vehicles look like they're sub-4 meters. They'd rather kept and reworked on the Polo/Fabia here if that was the intention, maybe in a more powerful 1.5TSI avatar.

[avira_tk]

Originally Posted by Kosfactor

Trust maybe a bigger problem - if they cheated with emissions , what else have they compromised? This may not be a problem with another brand but VAG who already had given a bitter taste to the consumers with their lack of reliability & durability.

One thing I have noticed is that those who who are looking for a second car for family members , their question is if Maruti has compromised on safety, what else have they compromised?! So this is not a witch hunt against VAG as such.

Those who need a diesel for the long run won't take VAG for its poor reliability and durability (perceived or otherwise), it's a liability

In terms of turning a brand around , lots of money to be made for executives but who would risk their career with this, not sure.

They haven't compromised on anything else, this whole test is like rating marathon runners based on their treadmill performance for 15 minutes of simulated running. Does any VW, skoda or audi owner complain that their diesel cars are junk? No, they have maintenance issues which are par for the course course. All of them who changed to tsi, miss the low cost running. The mileage ratings from those tests are a joke, not a single petrol engine met anything near the rated figure.

The real trust issue is with people saying that gas guzzling petrols regardless of size or displacement are somehow better than efficient diesels. The Japanese have been found fiddling with steel ratings and airbag manufacturing, you barely hear anything about that. There is no trust issue here, as no one says things like solid and safe when describing a Japanese car.

VAG cars are a great choice for long distance running, they don't lack reliability, have terrific range, ride and handle well above their segment peers. Maintenance is what you'd expect for a european.

[akshaysawant]

The biggest reason I feel is lack of engine options above anything else. You are no Maruti Suzuki who can deliver results in just petrol avatar. No diesel, no hybrids, forget electric at leat till 2025. Even if you launch compact SUV, it is really not going to help Skoda-Volkswagen and even Honda for that matter.

I do own a Skoda Slavia but my city ride most of the times is in Kia Seltos diesel automatic. Plain and simple reason: mileage, specially during the day time. Slavia does give decent mileage if you drive when the traffic is easy with light foot on the ‘A’ pedal. But as soon as you go little hard or get stuck in stop and go traffic expect single digit return, which is the case with most other petrol cars.

They seriously need diesel and hybrid options. Their cars are good to drive. People can take gamble with their service and you do have extended warranty and even service package, so that will help a little.

[TorquePull]

Originally Posted by avira_tk

The reason is the lack of a diesel, these cars are best suited for it, verbal gymnastics every quarter doesn't change reality. A 1.5 diesel in manual and automatic will solve the volume problem in short order. This whole dieselgate issue is blown out of proportion, other than some green lunatics and champagne socialists, no one cares about some particulate matter that is a byproduct of efficient combustion.

I’m looking to replace my Etios diesel and there are no options in sedan segment. So, I’m looking at Creta/Seltos only because they offer diesel.

VW made the best diesels, they could’ve easily sold decent numbers. The current situation is their own making.

[SmartCat]

I don't think it is right to attribute drop in Skoda/VW sales to "management change". This was expected all along as interest in newly launched platform vanes. As you can see, this is exactly what happened in 2012/13 & beyond:



With the kind of model line-up, dealership network and brand value, Skoda will eventually settle at quarterly sales of 4,000 to 6,000 units over the next few years. But this is still better than the past because now their average sale price is much higher than a decade ago. Low unit price Polo gone & replaced by more expensive Kushaq. Avg realization for Slavia is probably 1.5x that of old Rapid

Also, end of the day:

- (Virtus + Slavia) combined are market leaders. Sales is 2x that of Verna or City
- (Taigun + Kushaq) combined sales is comparable to or better than that of Elevate, (Hector + Astor) & Harrier

[Dr.AD]

Originally Posted by SmartCat

I don't think it is right to attribute drop in Skoda/VW to "management change". This was expected all along as interest in newly launched platform vanes. As you can see, this is exactly what happened in 2012/13 & beyond

Agreed 100% with this, and thanks for highlighting this point.

I think we are reading too much into these numbers, and too superficially. It is a cyclic pattern of new launches, high sales, sales decline over years, and another new launch! If we compare this current cycle to past cycles, Skoda is actually doing better, on "cycle over cycle" comparison!

Also, attributing sales numbers solely to sales & marketing heads, and commenting on their "performance" as company executives, purely based on these sales numbers, is a little far-fetched and uncalled for in my view. Sales numbers of an automobile product in a complex and competitive market such as India is a complex function of so many fundamental attributes, such as the car/product itself and its relevance to changing customer demands and use cases, its pricing, perceived and real reliability issues and ownership costs, and perceived and real dealership experiences. Out of all these, the person heading sales & marketing is one of the many players and factors involved. I do not think it is right to attribute the sales numbers solely to that person.

It is not a single person game where we can look at the scoreboard and say Person A played better than Person B. It is much more complex than that.

I think some of the conclusions in this thread are speculative, and have no evidence of causality from the data presented. In statistics, there are often stories and anecdotes about getting confused between correlation and causality. In this data discussed here too, yes there could be some correlation, but there is no evidence of "causality" at all to blame the respective executive members.