Bernhard Maier is in the midst of a non-stop schedule during his Delhi stopover. There are endless interviews with journalists followed by a press conference and then another interview to wrap up a hyper busy day.

The CEO of Skoda Auto will perhaps have little to complain about since this is a big occasion for his company and the Volkswagen group that it is part of. The India 2.0 project has got the approval of the board back in Germany, which means an investment of €1 billon euros is in the pipeline.

Leading the way

The fact that Skoda Auto will lead the project is doubtless a matter of pride to Maier even while he reiterates that it is for the group as a whole, which includes the VW brand. “This is a responsibility for the group and not individual brands,” he says while conveying the message that both Skoda and VW will have their own place in the sun. After all, the VW group has many production lines across the world as also Skoda and the idea is to work to each other’s benefit. VW drives the lines in China while Skoda will do something similar in India. Hence, there is no question of one brand being subjugated even while it is crystal clear that the Czech auto-maker will be in the driver’s seat here. Now what this means in taking over the VW plant in Chakan and how this will impact hierarchical levels subsequently remains to be seen. For now, Gurpratap Boparai, Managing Director of Skoda Auto India, will spearhead the manufacturing operations on the lines of what he successfully did with the Jeep Compass in his previous assignment.

Skoda, which was the first VW brand in India, began assembling cars from its Aurangabad plant in 2001. The Octavia caught the eye of the market and things looked promising. VW then set up its own facility at Chakan a few years later and the stage was set for a promising growth story.

Costing efficiency

However, the script did not quite go according to plan even while Suzuki and Hyundai tightened their grip in this market. The fact that Skoda has now been entrusted with the responsibility for India is a tribute to its competence in the key area of costing.

Skoda will also be responsible for Russia and it will be interesting to see how this pans out with India, which will get an earlier headstart. Maier indicates that overseas shipments will be an important component of India 2.0 and the learnings here on costing efficiencies could be leveraged for other emerging markets facing similar challenges.

Yet, there are concerns about the sub four-meter rule, which confers tax benefits for compact cars with engine specifications for both petrol and diesel. As Maier says, if this rule continues to exist, it could pose challenges to exports from India.

“Nobody asks for this in other markets and if you want India to be a more global player, you will have to get rid of this standard,” says the Skoda Auto CEO. From his point of view, the rule could perhaps go out of the window anyway with safety requirements coming in.

Likewise, adds Maier, the country is better off with lower tax barriers, a clear reference to the recent Budget’s import duty hike, which signalled a degree of protectionism. This is something happening across the world with the US leading the way in guarding its own interests.

There has been a lot of unrest lately with the growing threat of trade wars between the US and China as well as a tug-of-war with Europe.

Effect of trade wars

Maier agrees that trade wars are a big challenge even though Skoda is not present in the US and, to that extent, will not be so badly affected. Yet, these are needless disruptions, which will only cause more harm than good. “Trade wars will see no winner, be it China or the US. The biggest loser will be the customer who will pay more,” says Maier. On the India turnaround strategy, he is clear that localisation is key to ensuring a success story in the future. The fact that the country is already the fourth-largest automobile market in the world and poised to climb a rung higher by the end of this decade means that the sky is the limit.

“We need production volumes but I want a sustainable business. We are not a cheap manufacturer and would rather sell one product less,” reiterates Maier. He is betting big on a growing base of young professionals who will be willing to spend more for a good and competitively priced product.

“We have the platform for volume growth and it is a bold and decisive decision to divide responsibilities across brands,” adds the Skoda CEO. For instance, Audi will handle some regions as also SEAT while the entire VW group will be responsible for China. Maier admits that the VW group has struggled in recent years in India and “needs to be more ambitious”. Going forward, the top priorities will be to focus on costs, which means high levels of localisation while being the best-in-class on customer satisfaction. Timing is crucial too, which explains why an SUV will be the debut offering keeping in line with market requirements.

Planning for the future

“The goal is to get five per cent market share for VW group by 2025. We mean business and the proof is in the investments,” says Maier. Boparai then adds that Skoda is here to be a more significant, and not merely marginal, player. Setting up a world class engineering and development centre will be part of the strategy that will focus on exports, localisation as well as a product/model offensive.

The other priority is to expand the reach in semi-urban and rural areas that are now hotbeds for buying cars. This is where the VW group will have to rope in the right dealers. It’s not going to be a walk in the park for sure but, as Maier says, everything boils down to sustainable growth with a focus on quality and customer satisfaction.

“Change will not happen tomorrow but the process of change has begun,” he says. Interestingly, the VW group will still be open to partnerships (even while talks with Tata Motors were shelved) as in the case of the recent global tie-up with Ford for pick-ups, but these are early days yet. For now, India 2.0 promises plenty and the challenge is to deliver on the promise.

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