Now, Skoda Prefers Profit over Volumes
Czech carmaker’s local unit to focus on build quality, drivability, safety
The Indian unit of Czech carmaker Skoda Auto is undertaking an overhaul in order to reposition it as a seller of premium vehicles and as it targets sustainable profits over sales volume.
The Volkswagen group company is looking to occupy the space vacated by Honda Motor after the Japanese rival stopped selling its Civic and Accord premium sedans. In India, Skoda has discontinued production of its loss-making small car Fabia last year, and has diverted major attention towards the Octavia and Superb to achieve leadership position in the premium end of the mid-size sedan space.
The parent company has given a lot more responsibility to the local management than before to run the show. The revamp is being led by Sudhir Rao, managing director of the Indian unit.
“There is always a debate raging inside, whether we move to the mass market or stay premium,” Rao told ET. “Initially the thought was to run behind the volumes, but it is now clear, we will not come down the perch of premium-ness.”
Skoda will remain an aspirational brand and never be a budget brand, Rao said. “While the Indian market continues to be price-sensitive, but with time, we are sure, people will value good build quali- ty, drivability and safety.” While build quality has been a strong point for Skoda in India, poor after-sales service has been its biggest bugbear. The company wants to change that image. “We are trying to change the perception that Skoda cars are expensive to own, maintain and service,” Rao said. Customer issues and satisfaction have become top priority and Skoda reviews processes and concerns every week with the possibility of calling for emergency top-level meetings to resolve customer grievances. It has also deployed more employees on the field to tackle customer problems, people close to the company said.
In 2012, due to unavailability of parts, Skoda had more than 1,500 cars at dealerships for repair for almost a month. That number has now come down to less than 500. Repeat repairs, which were very high at 30%, have shrunk to the single digit. Its internal quality drive is called Customer Retention Index. “It has been consistently improving,” Rao said. While the house-cleaning process is under way, Skoda sales have taken a nosedive in FY14, a year that wasn’t good for India’s car market as high fuel and loan costs as well as weak consumer sentiment in a slowing economy kept buyers away. At Skoda India, sales in FY14 fell more than 30% to 19,959 units, the lowest in the past several years.
The revamp of Skoda’s India strategy is being led by Sudhir Rao, MD of Indian unit