Skoda Auto India to push Volkswagen Group volumes in India. India 2.0 Plan revealed in full

Team OD Updated: July 05, 2018, 08:54 PM IST

At an event today, Skoda Auto India detailed out its India 2.0 plan. In development for almost 18 months at this point, the India 2.0 plan, now ratified by the board, seeks to fall in line with a global strategy where each market will be led by a brand from within the Volkswagen pantheon.

To paint a global picture, China is to be led by Volkswagen while North Africa is to be Seat's playing field. Skoda will lead many markets, including India and Russia while Audi will lead the middle-east markets as well as South East Asia (excluding China). Volkswagen also has the responsibilities for North and South America.

What this means for Skoda India is that it will be the focal point for the lion's chunk of planning, strategy, production as well as investment for Volkswagen Group in India. Its job will be to drive volumes while other VW Group brands reorganise themselves for other roles.

The initial investment to this effect will be to the tune of 1 billion euros (Rs 7,990 crore approximately). This will mainly be used to develop new products based on the MQB-A0-IN platform and retooling of the Volkswagen' Chakan plant.

Volkswagen's Chakan plant near Pune has been churning out VW-badged cars since operations commenced but Skoda could now take charge of the plant

The Chakan plant will be at the epicentre of this plan. Skoda Auto India will be taking over operations here, at least functionally. All the Skoda badged MQB-A0-IN cars will be manufactured here, followed by their VW derivatives. The ownership of the plant is unlikely to change, given that this is little more than a legal technicality.

The first of the new MQB-A0-IN cars will be, as stated, Skoda badged. These cars will roll out by 2020 and it is expected that these will be two SUVs. We expect one will be a sub-four metre product rivalling the likes of the Maruti Suzuki Vitara Brezza while the other one will be a larger SUV to take on the Hyundai Creta. The German-carmaker is also likely to launch a small car on this platform by 2022, although it is unclear at this moment if it will come as a hatchback or sedan first.

The production version of the Skoda Vision X concept SUV will arrive at the 2019 Geneva Motor Show. The MQB-AO-IN cars could feature a similar design cues

This development shows that the Volkswagen group is changing tactics for India. The company, so far, was reworking cars developed in Europe for sale here. Now, the company will develop platforms and models here specifically for India. Another new attribute of these cars will be the high levels of localization they incorporate, up to 90%. VW believes that this will reduce costs to an extent. But it clarified that Skoda cars will continue to be priced at a premium over established rivals, given the inherent expense of the MQB platform. The company hopes that this will be offset by the upcoming BS-VI regulations. Volkswagen believes that prices of all cars will increase when these regulations come into effect, offsetting the price difference to some extent.

Skoda has so far focused on higher priced products in India

The big takeaway from the India 2.0 plan is that the Volkswagen Group is changing direction in a significant way. While so far, India has been served by global car and car platforms adapted to our requirements, that changes with the India 2.0 Plan. The new push is to use global platforms to develop cars in India, for India. That is a massive shift in strategy that should mean we like the cars more, the prices are closer to our expectations and hence, the business should do better overall. That is how Volkswagen Passenger Cars and Skoda Auto India hope to grow from just over two per cent market share to five per cent by 2025. This is a modest target but you must also account for the growth of the Indian passenger car market. In the context, Skoda Auto's plan to attack the small SUV space - popular but underpenetrated - is a good idea. A sedan or hatchback can follow later, but that is already a crowded space with firmly established players already. This is the first phase of the India 2.0 plan and you can be sure that the future phases bring more investment, more cars, including electric and hybrids in time.

Volkswagen's eventual goal with this new India 2.0 strategy is to garner 5% market share by 2025. In our experience, the company seems to be thinking in the right direction. Manufacturers who have initially struggled with internationally developed products in India have seen a rise in sales one they come up with products specifically developed for the Indian market.

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