Volkswagen Group’s Indian subsidiary, Skoda Auto Volkswagen India, has begun a feasibility study for its next phase of investment in India after rolling out its India 2.0 strategic plan on the right foot.
During his interview with ET’s Ketan Thakkar, Piyush Arora, the newly appointed MD of Skoda Auto Volkswagen India Private Ltd, said that as the parent company empowers India, he is preparing a blueprint to play a much greater role not only with the Indian car market but also within Volkswagen.
Arora explained that the group is gradually building synergies, using local expertise through engineering and localization, and creating a foundation for India to grow. The key mandate Arora has ahead of him is to build a sustainable and profitable business model with India’s 2.5-3.0 plans, which will play a crucial role in electrification.
Edited Excerpts:
Tell us about the shift from Mercedes Benz to Skoda Auto VW?
It was a great opportunity for me to move from a premium luxury brand into a group that has the widest portfolio and ambition to grow.
I could see that with the INDIA 2.0 strategy there was a definite desire to get engaged in this market and make it a region from the VW Group. I see this as a much bigger opportunity. The VW Group has evolved in terms of governance and structure and how they lead the market as a region to drive growth. With ŠKODA taking the lead for all Group brands in the Indian market and the regional responsibility, there is a very clear focus and a mandate to grow in this market.
What’s the mandate to you from the headquarters?
The mandate is to make India an independent, solid region. While HQ has a role to play, one cannot run a strategy without meeting the unique requirement of the market. The VW Group’s New Auto strategy is predominantly driven by the current transformation that the automotive industry is going through and all of the Group brands will have to undergo the transformation at the right time in the right markets (in terms of electrification). The key to the INDIA 2.0 strategy was not just to engineer or manufacture the product in India for India, but it was also for the world. And when we say we have regional, then we have to reach out to markets in the regions as well, whether it is the Southeast Asian region, African region etc.
We will be taking more responsibility on the development, for the model year changes, facelifts or for the new products in future – which will help in meeting market needs quickly. As part of this plan, localization is a clear strategy. The local engineering centre helps in the execution of the localisation plan. The other priority for me personally right now is to make our operations more profitable and move towards a direction where we can have sustainable profitable growth. Plus we are reaching out to a more customer base by expanding our network footprint. Our touchpoints have expanded by 25% to 500 in 2022.
The next step of 2.0 is on exports?
Our responsibilities will continue to grow more and more as we showcase our abilities to HQ to build their confidence in the team here. For the export market evaluation, we are in the process of formulating within the Group here, a team, which will then coordinate with the different brands. This team is responsible for coordinating with the brands at HQ for their overseas plans for the region.
The global sales penetration responsibility might still remain in headquarters. What we will set up here is to facilitate and coordinate faster execution within our internal departments. This will speed up decision-making so we can react to customer needs and capture the market much faster.
On VW group’s EV strategy in India?
We have started our electrification journey; it is a top down approach. Our endeavour with Porsche Taycan and Audi e-tron is very successful. We are looking at expanding our portfolio and studying relevant products for the Skoda and VW brands. We are evaluating our global products which may be brought as parts and components here. At the same time, we are aware of India’s aspirations of having electrification and we cannot stay out of that. So, we are evaluating opportunities of what product we can bring to India with a high degree of localisation. We will look at those opportunities as we go forward, and what can really become feasible or not.
While it’s still early, there is a serious consideration. But to say, it’s not on the table is also not right. That we are very far ahead on that also will also be an overstatement.
With diesel being ruled, what is the potential for Hybrid and CNG in the future?
The group has a clear mandate to move directly from internal combustion engines to battery electric vehicles and not look at hybrids.
India also wants to move on that path. As a stop-gap, it can be beneficial, but it has to be finally valuable to the customer.
We are inclined more towards BEV (Battery electric vehicles). In India, like in the rest of the world, the EV transformation is happening at a fairly rapid pace.
Usually, the ICE market share reduces and the EV share grows. But India offers a unique opportunity where both ICE and BEV will grow together. So you will have to get engaged in both. It’s not that in 2030, our internal combustion engines (ICE) numbers would necessarily go down.
Unlike in Europe, where ICE will go down, in India it will grow. So, you cannot lose focus on that market either, because it is still a growing market. Additional growth will come and faster growth will come from BEV, maybe that is a fact, but still, our ICE market (3 million) will also grow. This is my thought process and my strategy as well, aligned with the Group that we have to focus on both opportunities in India. It cannot be one or the other. So India will pose that challenge in the marketplace where multiple technologies will grow at the same time.
Alternative like CNG is part of a continuous discussion and evaluation. CNG penetrates more to the fleet segment, which is not an area of focus now.
We have just completed our INDIA 2.0 portfolio. Now, we have to start penetrating and increasing our market share. If there is a demand for that (alternate fuel), we will definitely evaluate it.
How do you approach the competitive intensity in the market with VW Group’s product portfolio strategy?
Our expectations from the Indian market are different from our rivals with higher shares. Not to say that we don’t want to play in that game, but the fact is our focus is on more profitable growth. We have set an eye on 5-7% market share. And I do believe that with our present product portfolio and whatever we are evaluating going forward, we will be able to improve on that.
Considering the resources available, we will evolve accordingly. To be able to say that we can bring a new product every six months would be an overkill from our point of view – because we have aspirations, which are to gain market share first and become profitable.
I do believe that we have much more opportunity to grow in the next 10 years, but on a profitable path and this would remain the focus.
Opportunities are getting evaluated for new products and will be introduced at the right time. We are in the process of doing the feasibility study. We have started the groundwork, of course on both fronts, but the timeline etc. will become more clear over the period of the next few months.
Can you reveal more about the alliance with Mahindra?
Vision for both the partners is well aligned. This fits into the Group’s New Auto strategy of de-carbonization of mobility in various markets. This association as of now covers parts and components that can be utilized. The Volkswagen Group has this great platform, MEB, which can be used for multiple products and is proven globally.
Could this help Group in the long run?
So, of course, once we conclude our EV strategy and by that time there is more work which has happened on the Group strategy with Mahindra, it will be beneficial to both finally. But it’s too early to say anything in that direction.
On the need to capitalise on CKD Imports?
India needs those high end premium products, and going forward will have to focus on that. I’m definitely propagating and looking at that part of the strategy more actively.
The challenge has on the supply side. If you look at today’s supply situation, there is more demand than supplies. And for parts and component business to flourish, you need backend support from the mother plants.
The rub-off effect from the customer’s point of view is extremely high from premium to volumes models. There are companies which are taking good advantage of this strategy.
We are working on expanding our parts and component portfolio (CKD) across all three brands (ŠKODA, Volkswagen and Audi).
