Škoda-VW Exhibits Renewed Vigour With Upcoming India Strategy

Škoda-VW Exhibits Renewed Vigour With Upcoming India Strategy

Industry Track March 2020 Škoda-VW India Strategy Volkswagen Group 2025 Auto Expo 2020
{data-social}

The Volkswagen Group has announced a fresh new offensive for the Indian market, where between ŠKODA AUTO and Volkswagen, the Group is aiming for a 5 % market share by 2025. At the Auto Expo 2020, the companies showcased a slew of products that are aimed at the future Indian market, including the ŠKODA VISION IN and Volkswagen Taigun.

In early February, in a show of collective strength of the Volkswagen Group in India, the newly-formed ŠKODA AUTO Volkswagen India – the entity formed by the merger of Volkswagen and ŠKODA in the Indian market – brought together all five entities under its umbrella – ŠKODA, Volkswagen, Audi, Porsche and Lamborghini – to one event, the first Media Night organised by the group in this market.

Almost 18 months earlier, the companies had announced its India 2.0 project to drive the next phase of growth in what it recognises as an extremely important market. Collectively, both ŠKODA and VW has less than 2 % market share in India, and ŠKODA now has the responsibility of leading the group’s India aspirations in the coming years.

Bernhard Maier, CEO, ŠKODA AUTO called India one of the most exciting and promising growth markets for Volkswagen Group, and hoped that the INDIA 2.0 project would help the group achieve a combined market share of 5 % by 2025, depending on market and segment development. He recognised that the Indian market has witnessed some volatility in the past few years, but the long-term prospects of the Indian market is still intact.

India 2.0 is all about developing the right product for the Indian market, Steffen Knapp, Director, Volkswagen Passenger Cars had said when we interviewed him in April 2019. While that’s the first and key objective, the group realises that to be successful in India, it has to do it the Indian way in terms of designing, developing and localising the products. The group has reiterated its commitment to reach up to 95 % of localisation in the new range of vehicles. VW will focus its India strategy on SUVs with plans to launch four new products in India over the next two years. Together with ŠKODA, the Volkswagen Group is investing a total of € 1 bn (approximately Rs 7,900 cr) in the INDIA 2.0 project of which € 250 mn will be invested in R&D.

A key component of the group’s India 2.0 strategy is the MQB-A0-IN platform – a variant of Volkswagen’s MQB car platform specially developed for the Indian market – which forms the basis for ŠKODA and VW’s planned offensive in the market, starting with the two compact SUVs, the ŠKODA VISION IN and the VW Taigun.

The MQB platform will feature transverse-mounted engines leading to a wider number of common parts across models and brands. The flexible platform has been designed to accommodate a wide range of vehicles across different segments. For Volkswagen alone, it can provide the underpinnings for the likes of Polo and Beetle right up to the Jetta and Passat. Capable of meeting all upcoming, stricter safety and emission regulations in India, the platform will be the basis for all future ŠKODA and Volkswagen brand models developed in the region.

POWERTRAIN STRATEGY

The production variants of the ŠKODA Vision IN as well as the VW Taigun will come with two petrol engines, the 1 l TSI turbo-petrol engine and the 1.5 l TSI turbo-petrol. Speaking to the media, Jürgen Stackmann, Member of the board of management of the Volkswagen brand responsible for sales, marketing and after-sales confirmed that the 1 l TSI turbo-petrol engine will be manufactured in India.

There will, however, be no diesel offering on either the Taigun or the VISION IN. VW, in fact, has also exited the diesel engines on its Polo and Vento models in India, and Knapp reiterated that there is no business case for smaller diesel A0 cars in the BS VI regime, considering the significant price escalation due to mandatory usage of expensive technologies such as SCR.

Stackmann agreed the development with regards to diesels is “quite counter-intuitive, but that’s what’s happening globally”. The high-tech diesel technology is being squeezed out of small cars for affordability reasons, as customers don’t want to pay for it. VW remains committed to diesel, but only for larger cars, he said.

Responding to our question on opportunities with alternative propulsion, Stackmann said the company is and will remain fully committed to TSI and TSI hybridisation with mild-, full- and even plug-in hybrids in the future. VW also remains committed on the TDI technology for the next generation of larger cars in Europe and as well as India because these are the two places where diesels still sell.

To ensure energy balance, there’s no system available on earth that is as efficient and as effective as e-mobility, specifically when the energy source is not coal. In that context, there are two emerging trends globally; one, countries are worried that they need to get out of coal burning – Germany has already committed to stop coal burning by 2036, while many others are working towards meeting the commitments made in the Paris Agreement. Volkswagen, too, has decided to get out of combustion engines in Europe by 2040.

VW will keep pushing TSI for hybrids, explore natural gas, focus deeply in electric and in the future see the emergence of fuel cells for heavy trucks, not cars. Fuel cells are a smart solution for trucks, and could be the right replacement for diesel, Stackmann said. E-fuels for cars, too, is a complete waste of time and investments and to get to a decarbonised world, we must take the straight line of energy – windmill-battery-drive, he suggested.

ROUND-UP

As part of the India 2.0 project, two new entities – the ŠKODA AUTO DigiLab India and Software Development Centre – have also been set up with an aim to develop tailor-made digital and mobility solutions for India. The DigiLab in India is the company’s fourth such innovation hub globally, after the ones in Prague, Tel Aviv and Beijing. In addition, a dedicated software development centre has been established by Volkswagen IT Services India with offices in Gurugram and Pune to support ŠKODA’s IT requirements globally and develop digital solutions. The aim of these centres is to create a diverse digital ecosystem for ŠKODA and VW customers, said Gurpratap Boparai, Managing Director, ŠKODA AUTO Volkswagen India. The India innovation lab may also support ŠKODA’s core business globally with new technologies and digital solutions, he said.

Overall, the ŠKODA-VW combine is preparing to go the whole hog in its new thrust for India. From products being designed and developed specifically for the Indian market, to building capabilities in India that could potentially be used globally, both brands are betting big on the Indian market. By 2025, ŠKODA is targeting sales of 100,000 cars a year for its brand in India. That might seem a steep aim considering the company just sold about 15,000 units in the last calendar year, but with the renewed focus on new products, localisation, network growth and improved aftersales and service experience for consumers, meeting that target shouldn’t be difficult. This, of course, will be aided by ŠKODA growing its sales network to 200 outlets by 2023 from the 85 currently, and VW taking its sales outlets to 150 units by the end of the current calendar year.

TEXT: Deepangshu Dev Sarmah