Skoda Auto India realigns itself to grow

by Sumantra B Barooah , 28 Aug 2015

Škoda Auto India CMD Sudhir Rao is focussing heavily on strengthening operations to grow the company profitably.

When Škoda changed its tag line from ‘obsessed with quality since 1895’ to ‘Simply Clever’ a few years ago, it was more than that. The change was also in the company’s approach to the Indian market. Like some other foreign car manufacturers, Škoda too had some ambitious plans, including a 5 percent market share, in India. It discovered that selling cars of good quality is not good enough.

Three years ago, Škoda Auto India started a practice called ‘SKIMM’ (Škoda India management meeting) to address all issues and revive the business. It’s chaired by Sudhir Rao, chairman and managing director of Škoda Auto India. The head and key members of every division meet every week with one area of operations as the theme of the meeting.

The fact that customer care was the only theme for the first one-and-a-half years reflects that Škoda knew where the key problem for the brand lay. SKIMM offered, for the first time, a proper forum for people to work cross-functionally in Škoda Auto India. “It forces information, knowledge, questions, healthy peer pressure. If the sales and service team has an issue in the field it has a forum to bring it up officially and say “Mr. Manufacturing, Mr. Quality, Mr. Engineering, please help me out with this problem. They did not need to call for a special meeting for this issue,” says Rao.

In the past three years that Rao has been in the company, he has been busy rebuilding the foundation for Škoda’s sustainable growth in India. Given its positioning and the segments it operates in, a 5 percent market share doesn’t seem realistic now. “We are also dovetailing our thinking, strategy and our brand character to the global direction as much as possible. There is no point becoming a different Škoda in India than what we are globally. We don’t think it is sustainable any longer,” says Rao.

The foundation rebuilding period over, Rao and his team are looking at an upward growth curve now. According to Rao, customer retention has gone up and the number of grievances have gone down. Škoda has a less than one percent market share currently, which it is confident to be able to take to one percent with everything it has now, 2 or 2.5 percent with the re-entry to the premium compact car segment, and 4 percent in about four years.

The Fabia, Škoda’s second largest selling model globally, is set to be re-introduced here. The Rapid sedan is driving Škoda Auto India’s volumes. “We have made tremendous progress in the Rapid segment to be able to confidently say that we have a sustainable business model in the segment,” says Rao. Škoda’s global best-seller Octavia is the third best-seller (April-July 2015) in its segment here.

Even as Škoda Auto India rebuilds itself for growth, Rao is also cautious in striking the balance between building numbers and the brand. Even though the commercial fleet market is growing, Škoda is not keen on selling its cars there. “We would not sell the Octavia with a yellow numberplate. It is a conscious strategy,” says Rao. The decision to sell the Rapid to the fleet segment with some “strong conditions”  may also be reviewed now.  

For Škoda, nine of its top 10 markets are in Europe. But it sees a promising future in this part of the world. China and India, along with Russia in Europeare attracting major focus from the management of Škoda Auto. China is Škoda’s largest market globally, with sales of 281,000 units in 2014. The brand sold 84,437 units in Russia and 15,538 units in India last year. Sales for Škoda in India could be in the range of 25,000-30,000 units in the next year or two.

It’s been 15 years for Škoda in India. The lessons learnt during this period are being practiced now to reap benefits in the future. And as the Indian market warms up to relatively more premium models in many segments, Škoda is hoping to meet an inflection point for growth in the near future. Rao says, “There are times in a company’s life when you need to think strategy, talk strategy less and just think operations. That’s really what we are doing now.”