Skoda India begins putting its house in order

When Skoda entered the Indian market a little over a decade ago, not many people had heard of the company. Yet, it just took a single brand like the Octavia to establish the Czech automaker as the first mover in the premium sedan segment.

After this dream start, a lot was expected from Skoda especially when parent company Volkswagen also decided to set up shop in the country.

The two went in for a common platform strategy at a new facility near Pune which resulted in the rollout of premium hatchbacks (Polo/Fabia) and sedans (Rapid/Vento). On paper, it was the perfect script, except reality was a different ballgame. Today, Skoda is a marginal player in India’s car industry despite being around for many years.

Sudhir Rao, Chairman and Managing Director of the Indian operations, is, however, upbeat about the road ahead. “We have re-evaluated our strategy based on our strengths and future ambitions. In 2002, we established the premium value-for-money European product category and somewhere along the way, we perhaps diluted this USP,” he says.

The priority now is getting a fix on the future and, going forward, Skoda has decided that it is important to get back to its heritage. The company believes it has strong products in terms of technology, practicality and value.

Rao believes that it also imperative to be present in a certain segment which will give growth but calibrate it in a gradual and measured way. “After discontinuing the Fabia six months before the global transition to the new car, we are taking a deep breath to analyse our (small car) strategy,” he says.

For the moment, Skoda has the Rapid platform to work on and has acknowledged the need to approach it with a “little more Indian/Asian strategy” in investments and costs. It is here that Mahindra Engineering Services has been roped in to help ‘Indianise’ the overall thought process.

The goal now is to find the sweet spot which boils down to “how low you can take the cost without compromising on brand character”.

It is an interesting initiative in fusion of cultures where the best mix of Indian and Czech inputs will be the basis for the future.

This is precisely what Skoda is doing with the Rapid facelift in tandem with Mahindra Engineering Services. Once things are in place by the year-end, the company will look closely at taking these lessons beyond the Rapid to the small segment.

According to Rao, premium hatchbacks will gradually become more popular in India. “The market will move towards a Skoda kind of product. Perhaps we were a tad early with the Fabia family but now we are ready to be a little more patient and wait,” he says. A timeframe of 3-4 years would now seem realistic from the company’s point of view.

The other important task on hand is to address the issue of customer satisfaction and ownership experience. Rao says rapid progress is happening here and there is clearly a distinct “upward trend” of improvement.

“There is a strong emphasis on India and Skoda is keen to grow here but a few things will have to come together in place,” he adds. One is the company’s internal capability in terms of developing products the right way. A more solid and robust ownership experience is the next task on hand “where we are already there”.

Rao believes things are moving in the perfect direction for Skoda and it will soon be ready with the next phase of “strategic orientation” when all factors come together. “We will create a plan which will help us become a five per cent player as we are clearly not content with our present position. We do not want to be rash and invest before we are ready,” he reiterates.

In a little over two years since Rao took charge at Skoda, there has been a lot of change with the culture clearly evolving towards becoming more customer-centric and oriented towards greater efficiency. A whole lot of non-value added activities have also been eliminated. And while the company has turned leaner and meaner on the manpower front, Rao maintains it has become more humane too.

“Our employee engagement index has gone up consistently in the last two years despite tough measures. People find the job more interesting and are learning a lot more. They are feeling good about themselves. These bitter medicines have actually been very productive,” he says.

Today, Skoda is hiring people from engineering/management colleges and bringing talent from across the country. There is a deliberate focus on diversity which has also led to the company having its first woman on the shopfloor of the Aurangabad plant.

“These youngsters view Skoda positively from a product/brand perspective but are keen on it being better. It is good they see areas for improvement and along with experienced people, the combination is working well. We are blending idealism with experience,” Rao says.

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