Q: How has been 2022 for the Skoda-Volkswagen Group?
Let me give you a little about how the year 2022 ended. For the complete group, all 5 brands, the year was very strong. The growth numbers were largely driven by four products from ŠKODA and Volkswagen. We sold close to 134,000 cars, 33,000 exports, and 101,000 units in domestic sales.
The ŠKODA brand grew by almost 125% and India is now the third largest market for it, the biggest outside Europe. And Volkswagen registered close to 58% growth, the biggest in the past five years.
All four products for India 2.0 have been extremely well received in the market. It has been a very busy period – the last 14 to 15 months, both from launching the India 2.0 cars as well as making them relevant for the Indian market because these products are designed and developed with a focus on India – Make in India, for India, and the global market.
Apart from this, all the luxury brands also achieved substantial double-digit growth – Audi, Porsche and Lamborghini. Over 90 Lamborghinis and 779 units of Porsche were sold, the highest ever. Audi has also shown substantial recovery. These Indian products are designed and developed based on the DNA of the Volkswagen brand.
This gives us a very good foundation for further growth. Last year, we gained almost 1% market share. We are not yet there, the 5% target, but our aspirations are, so we are inching toward that. In December, we almost reached 4% market share, which is heartening.
Q: What about 2023? How do you plan to sustain the momentum?
We need to move further to gain profit in 2023 and beyond. It is very important, with the full availability of all four products and other products. We launched 20 upgrades last year, and we are looking forward to something similar for this year also. The full availability of India 2.0 cars should help us gain more market share this year and move further in the direction of 5%, which we want to achieve.
Q: When are these upgrades coming? Are there any fresh models to be introduced in Make In India 2.0?
We are elaborating on our strategic product portfolio. Product launches have been adjacent to it. The latest product was launched in the middle of last year. First we want to consolidate these recently- launched products. At the same time, we are also evaluating the product portfolio for the future – both in what we can do above these segments and what we can do below these segments.
Q: What are the key segments Skoda-Volkswagen is aiming at?
We are evaluating all possibilities. The A0 segment cars – the SUVs, and the Sedans – are what we have in the marketplace. We are evaluating below and also above these segments. Today MQB-A0-IN is an extremely modular platform, with some opportunities that exist in both directions. We have to move forward and conclude in which direction we go. But the focus for us in 2023 is on consolidating our presence, utilizing the full availability of these products.
Q: What about the supply chain problems?
Last year was challenging for the supply chain. Restrictions like semiconductor shortages, geo-political challenges, and the Russia-Ukraine conflict affected the supply chain more in Europe than in the East, predominantly in Asia and other parts, and North America. Europe was the worst hit because of the ongoing conflict. Now the situation is getting better. But we continue to see certain disruptions. Not only we, other manufacturers also might face similar challenges.
Q: Will it ease out any time soon in 2023 or will it last longer? Does the war prevent normalisation? What’s the real issue?
Some of the supply chains were through these regions. Some of the suppliers have relocated, others have resumed work. From this perspective the situation is better than what it was 12 months ago.
The semiconductor shortage has eased to a certain extent. Initially, multiple suppliers were getting affected, but now only a few for specific things. Finally, at the end of the day, to build a product we need everything, even if only one link is missing, we face a challenge. From that point of view, we are still having some disruptions.
So, we have to approach it cautiously, we are continuously supporting and engaging with our suppliers. Gradually the situation will improve. Whether we will be totally out of woods or not is difficult to say now.
Q: What is the future of Sedans in India?
I think it was driven down from both sides, lack of product availability in that segment and falling demand. Customer preference, not only in India but also globally, is moving towards SUV body-style. But I do believe, and all projections also show, that in the sedan market or the hatchback market, there would be good space. I’m very happy that we decided to enter that space and stay there.
The previous decline in that segment is also because of the lack of products. When fresh products are brought to the market, there is enthusiasm about them and also in the overall segment.
Customers are extremely happy with the driveability of our cars. So, to answer your question, I would say that the sedan segment might not be as bullish as the SUV segment but there is enough market share.
Q: Do you think sedans will make a comeback someday or the SUVs will remain the largest segment going forward?
The movement from the lower hatchback segment has been more towards SUVs andUtility Vehicle body styling. Hatchback, the biggest market in the small car segment, is losing some ground. It has moved to SUVs. At the same time, the market for the segment above the small car is substantial and it is driven by a plethora of products available in the Indian market.
But the sedan market, I think, after we introduced the cars, has slightly grown and it will continue to have that kind of market share. Our projection still shows that it will hold its foot, even if the market grows from here on. The Indian car market size is close to 3.8 million to 4 million units. Even if it goes to 5 million, this amount of market share for sedans would sustain.
Q: What would be the expected contribution?
We expect anything between 12% and 15%.
Q: What is the demand for Skoda and Volkswagen cars?
It depends on the market growth which was more than 20% last yezr. The industry is not expecting that kind of growth rate to continue. But we want to outpace the growth of the auto industry in India. Double-digit growth is what we are looking at for both the brands.
Q: But analysts predict that it will be somewhere between 7% and 9%, because of the overall market situation. How do you respond to that?
I have heard these numbers as well, but since we want to outpace the market and gain more market share, we should bring double digits, at least we are aspiring and working to achieve double digits.
Q: Is the target of 5% market share backed by Make in India 2.0 products?
We are talking about the 5% market share for the Group. The total market share of the luxury brand in India is 1%. It might grow a little bit. But the growth driver will not be for the overall portfolio. So, you can say that our growth driver is predominantly India 2.0 cars. Going forward, to go beyond these numbers of course is our aspiration. But one step at a time. Then, as I said in our product portfolio expansion strategy, we are looking at bringing in more products.
Q: For ŠKODA and Volkswagen, do you think there will be a mass EV product or will it be a CBU?
According to all kinds of estimates, both from us and from the research companies, electric vehicle penetration should be between 15% and 25% by the end of the decade. It means that it would become a substantial market. If we have to be relevant in the Indian market, we have to bring products into that space. EV also has a part in our overall product strategy. Whether you call it mass EV or you call it entry-level BEV, Volkswagen is looking at that possibility globally.
But our present strategy is driven by the top-down approach in the luxury space – we are already present with a very good portfolio between Porsche (Taycan) and Audi (e-tron range). And we are also evaluating the possibilities of ŠKODA and Volkswagen brands.
Q: Can we see Polo hatchback back in the Indian market?
I think Polo has been a huge success in India. I have never seen a goodbye to any other product the way it was given to Polo last year. It never happens because people are happy to see the end of a product’s life cycle and look forward to a new car. Presently, in that segment customer preference is moving towards the SUV body style.
The product is available globally, if the demand is sufficient, we have multiple ways of getting it into the market – fully built up or manufacturing or doing parts and components, there are multiple ways.
I think in overall product evaluation – the hatchback segment is not showing very much progress, yes there are enthusiasts but for business, we need more than enthusiasts.
Q: What about exports, and the future growth areas in this particular segment? Can you give us the ratio?
Of the 134,000 cars, 100,000 were sold in the domestic market and 34,000 were exported – I would say it’s a good percentage, and going forward, a similar ratio will continue. Our effort in India is to gain market share. So, we will utilize more and more for the domestic market, but export also is an important market for us. It’s not only that, we are focusing on the right-hand market also.
We have left-hand drive markets and we will continue to focus on that as well.
The biggest export market is South America, Mexico in particular, but we are also looking at geographical expansion as part of our Expand Strategy. Going forward, we are looking at the Southeast Asian markets.
One step towards that is that the ŠKODA brand will enter the Vietnam market with our products next year. The strategy is not only for fully built-up supplies. We can also facilitate wherever the trade constraints force us to produce the cars locally, like, in the best cases, Southeast Asia.
In Vietnam, we will produce cars in the parts and components business and we will supply from here. The majority of the parts are developed in India with 95% localization of our India 2.0 cars. Most of the components will go from here until Vietnam also looks at localizing some of the parts. From that point of view, we are looking at expanding our portfolio also in the Middle East market. So far, we have been focusing on the VW brand from the export point of view, now we have started with the ŠKODA brand as well. North Africa is another market which we are looking to expand. So, geographically we want to expand further and create opportunities.
Q: How do you see the market growth in the next 5 years?
As I have been saying we do believe that by the turn of the decade we are looking at anything between 5.5 million to 6 million. Anything between 15%-25% electric vehicle penetration is something that most of the industry believes will happen. And it will be a substantial market from that point of view. It’s already a very interesting market. It’s getting more and more vibrant.
I think what drives the auto industry is good infrastructure, it is getting developed despite the taxation challenge that I have mentioned earlier. From that point of view, I think it’s really helping. Urbanization is also making people buy compact cars because city parking is a challenge. And people like to easily manoeuvre the traffic. I see that the segments that we are present will grow substantially.
Also Read:
According to the transport department, the government will erect 154 EV charging stations, the network of which will cover around 4,500 km of roads in the hill state.