Volkswagen’s Tension on Skoda’s Subdued Market Role


One of the very first companies from the Volkswagen group to make an official entry in the market of Indian Automobile Industry was the Czech Automotive company, Skoda Motors. Since then, with its prime products to be the only two cars as Octavia and Superb, this company had been pretty successful with its good quality and aesthetically appealing niche products to offer in the market which later increased to be a fleet of 6 consecutive cars in different segments i.e. the Fabia hatchback, the Octavia, Laura and Rapid sedans, the Superb saloon car and finally an SUV called Yeti.

But until last year, the company and its mother company realized that the Skoda is struggling a lot in the market due to poor and very disappointing sales figure it had been collecting all this while and that’s how and when, the Volkswagen group decided to limit the operations of its struggling company. Last year, due to very poor records in sales, the company also had to shut down the production and sales of its premium class hatchback, the Fabia. And this year as well, with an evenly decreasing report of sales to be around some 19,000+ units for the financial year 2013-14 in comparison with the sales figures of 2010-11 to be around 22,000+ units on a whole, the company seems to be constant in its struggles.

Considering that, we believe that the company currently has only two vehicles which are selling adequately, those are the Superb and Rapid sedan. Apart from that, the new Octavia had been priced very high which may affect its sales figures as compared to the time it was first introduced. Also, the Yeti SUV seems one if the biggest failures for the company as well with the least sales figures with a degraded demand for the Laura as well

Feeling consolidated to the scenarios, when we tried to talk to an official of the company, he disclosed to us that the company is planning to reconsider the cost structures for its products already on sales in the market, but he also couldn’t deny the fact when he stated that, “it won’t make any sense in selling products at loss also, if it’s not at all going to be profitable.” The official also seemed confident when he made sure that the VW group is not at all planning to move the brand completely out of the market, but instead of keeping it into the mainstream competition market amongst the sales giants like Maruti, Honda, Hyundai, Toyota etc. As of now the company is focusing more on maintaining or actually resurrecting the image and position back once again. The process may include an addition of some VW inspired vehicles to compete in the market more competitively as sources suggest, with assumptions on some of the products to move out of the market can’t also be denied as well as a part of the new strategy.

But then, under these circumstances, making any assumptions from our sides or expecting anything from the company as of now will be useless as the company is going to be making a lot of unexpected moves in its way to get out from this crucial situation which has been prevailing since a long while, and which not only affects the sales and shares of the company, but even affects the employees at a certain level because company had also been witnessed to go minimal on them while putting even some of the most senior members of the company on probation, considering a harsh time for Skoda in India.

Also, as one of the senior sales executives suggests, that India is a very challenging market for outside companies as to keep pace with the costing and product offering. VW on a whole is also getting affected as the sales target are down for the targeted year 2018 by 12-13 %, which were earlier expected to be 20% of its total gross sales in India.

In the end, we believe Skoda will get through this and keep offering us such wonderful wheels as it had been doing earlier, but as a strategic update, it won’t be wrong if we suggest that economically desirable cars would be the right choice for Skoda to make a good move with.