Skoda’s Strategy for Competitive Pricing and Localization
Skoda is gearing up for the launch of its upcoming compact SUV, slated to hit the markets next year. This new offering marks Skoda’s entry into a segment already crowded with established players such as the Maruti Brezza, Hyundai Venue, and Kia Sonet. To compete effectively, Skoda plans to capitalize on extensive localization efforts and tax benefits available for sub-four-metre vehicles, ensuring aggressive pricing.
Piyush Arora, MD and CEO of Skoda Auto Volkswagen India, emphasized the significance of localization in achieving competitive pricing. He stated, “For India 2.0, we had already said we have achieved almost 90 percent localization and that is the number we want to do for India 2.5 as well.”
Under its India 2.5 plan, Skoda aims to initiate production of this compact SUV by January 2025 in India. Leveraging the heavily localized supplier base for the MQB AO IN-based Skoda and VW cars already in the market will enable Skoda to achieve higher economies of scale. This will involve extensive part and component sharing from larger models like the Kushaq, including seats, suspension, electrical components, infotainment, and instrumentation devices.
Powertrain Options and Considerations
Regarding powertrain options, the compact SUV is expected to feature heavily localized Indian engines, particularly the 1.0 TSI and the 1.5 TSI turbo-petrol units. However, the feasibility of the larger 150hp engine in the sub-four-metre compact segment is still under evaluation. Arora explained, “In the India 2.0 segment, we have seen that there is a good demand for the 1.5-litre (turbo-petrol engine). But for the sub-four-metre compact segment, we’ll have to see if this really works or not.”
Due to its sub-4m length, only Skoda’s compact SUV equipped with the 1.0-litre TSI engine will be eligible for tax benefits. Similar to other models in the segment, if a 1.5-litre TSI engine-equipped variant is offered, it will not qualify for tax incentives.
Global Expansion and Export Potential
The compact SUV manufactured in India will serve as a global model, reflecting Skoda’s expanded global development responsibilities. Besides catering to domestic demand, the SUV will be exported to markets like Mexico, Africa, and select South-East Asian markets such as Vietnam. This underscores Skoda’s commitment to leveraging its Indian operations for both local and international markets.