Volkswagen Group plans to make India a strategic export base for Skoda

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Multiple model upgrades and tweaks in 2023 will help Skoda Auto Volkswagen sustain growth in India.

Having laid a decent foundation for the India 2.0 project, the Volkswagen Group is now looking to build India as a strategic export base for the Skoda brand.

India, which has already become the third largest market in the world for Skoda, will take greater responsibility to develop the Middle East and the South East Asian region for the Czech brand. Skoda says it is open to joining hands with dealers, distributors and assemblers in these regions to increase its volume base. The company is exploring countries like Indonesia, Thailand and Malaysia as potential markets to expand into.

  1. Skoda will be exporting models first to Vietnam
  2. VW group has been exporting Vento to Mexico, South Africa

Skoda to focus on South East Asian and Middle Eastern markets for exports 

As its first step, the Skoda brand will be entering the Vietnamese market in 2023 with completely built imports (CBUs), before it ships CKD kits from India to the South East Asian market in 2024. The company expects Vietnam to bring in incremental sales of 30,000 units per annum over the mid-term.

Piyush Arora, Managing Director of Skoda Auto Volkswagen India, told our sister publication Autocar Professional that India is playing a major role in developing the South East Asian region and the Middle East, and that these are the two main focus areas Skoda is looking at to go beyond the business which it has today.

“What is the best possible way to get more entry and market share into these markets is part of our overall strategy development for Skoda in terms of region,” Arora said. “We have partners in the Middle East and will continue to [explore]. But once we have identified the right strategy for the right product for the different markets, then we’ll start looking at that [role of partners]. Our immediate priority is Vietnam.”

Exports have been crucial for Skoda Auto Volkswagen Group  

To be sure, exports have been a critical pillar for Skoda Auto Volkswagen Group to ensure that the company enjoys a scale advantage and makes profits. For the Volkswagen brand, India has been an important base for exports to South Africa and Mexico for the Vento sedan in the past. While Volkswagen will continue to serve the Mexican market, the development of exports out of India for Skoda will bring in incremental volumes for the MQB A0 platform cars in the future, helping the Group to reinvest into new models in the future.

Already a dedicated exports team for the Skoda brand has been set up locally which works in tandem with the HQ in defining the potential growth markets in the future. Even a dedicated bay has been created for parts and components exports from India to serve these needs.

Over 20 new model launches in 2023

Back home, Arora says the demand momentum remains strong, however, the market growth rate is likely to drop to single digits of 5-8 percent in the next financial year. But the Group will continue to look at outperforming the market as supply chain improves.

“We are looking at a double-digit growth because we clearly want to move in the direction of the Group’s [target of] 5 percent market share [in India]. Last year was not only constrained because of the supply situation, but also because of product availability. Slavia was only available for 9 or 10 months, while Volkswagen Virtus was available only for 6 months. Having the availability of all products, we look at double-digit growth. Not only for Skoda and Volkswagen, but for the complete group,” said Arora. 

In the calendar year 2022, Skoda Auto Volkswagen produced 1,34,000 units with domestic sales of 1,01,000 units across all its brands – Skoda, Volkswagen, Audi, Porsche and Lamborghini. The Group saw a 1 percentage point increase in its market share in 2022.

Arora says in December, the Group had a market share of 4 percent and he is confident that a raft of upgrades and tweaks for future models in 2023 will ensure double-digit growth and improvement in market share. Though Arora did not mention any specific product names, he said the Group is looking at having over 20 product or model updates across brands this year. 

According to company sources, the Group is looking at a production plan of 1,57,000 to 1,75,00 units for the current calendar year on the back of improved supplies and an expected rise in export volumes. “For 2023, the focus will be on scaling new heights on a very strongly built foundation over the past years,” he added.

EV plans for India are progressing, assured Arora, and the Group is going to rely on CBUs and CKDs before locally produced models for India are firmed up. The VW Group’s pact with Mahindra may help the Indian subsidiary too, believes Arora. 

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