Skoda Auto expects capacity utilisation at its plants to increase sharply in 2024

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Škoda Auto Volkswagen India plans to introduce new models as well as refreshes of the existing ones in 2024, along with entering the electric vehicle (EV) segment, even as it seeks to step up exports of made in India cars substantially. This will help the Czech firm increase its capacity utilisation at Aurangabad and Chakan plants to more than 90% from the current 70-75%, making the next year a critical one for its India operations, said its group managing director Piyush Arora.

As part of its India 2.0 strategy, announced in 2018, the Volkswagen Group invested 1 billion euros in the country to locally develop multiple models at varied price points, with Skoda taking the lead of the India operations. Having tasted reasonable success with the strategy, the group is now in the process of firming up investment and timelines for the next phase of growth.

It plans to introduce the new generation of its flagship model, Superb, in 2024, even as it expects sport utility vehicles (SUVs) to lead its future product strategy in India, said Arora. In addition to the Superb, Skoda will introduce a mid-size SUV, its first battery electric vehicle and a refresh of its existing models, he said.

According to Arora, sedans, which have a 10% share of the overall passenger car (mid-size and compact sedans and hatches) market, will remain in favour, even as the buyer preference has shifted to SUVs, with the latter accounting for one in every two passenger vehicles sold.

“The overall body styling has shifted to SUVs, but I am still happy that we decided to have more sedans than SUVs as part of India 2.0 offering. While the sedans may not be gaining segment share, the overall market is growing,” Arora told ET. “There are sedan lovers, and they are not vanishing. Getting out of the sedan is not in the offing and we will continue (to offer sedans).”

Sales of passenger cars (hatchbacks and sedans) in India declined to 940,267 units in the first eight months of 2023-24 from 10,20,946 units a year ago, according to the Society of Indian Automobile Manufacturers (SIAM). This was in sharp contrast to SUVs, which saw sales surge to 13,85,309 units between April and October from 1123,708 units a year ago.Within passenger cars, sales of midsize sedans – including Honda City, Hyundai Verna, Volkswagen Vento and Virtus – increased to 53,600 units from 52,222 units in the year-ago period. “Sedans are holding ground and we have a good amount of booking for both Virtus and Slavia. However, we are cognizant of the shift to SUVs in India and globally, and hence the future product strategy in India will be SUV-led,” said Arora.Meanwhile, Skoda is also gearing up to enter the battery EV market with the Eniyaq, an electric SUV it has been testing for the Indian market, in the first half of 2024.

Most of the brands of the group including Audi, Porsche and Volkswagen, have done better than last year, said Arora. Sales of Volkswagen cars increased to 25,537 units in the first eight months of this fiscal, against 22,952 units in the year-ago period, while Skoda sales slipped to 28,634 units from 31,380 units during this period, according to SIAM. Arora attributed the decline to the restructuring of the dealer network and said he expects an improvement in sales in the months ahead.

Meanwhile, he said, exports, which accounted for 33% of the company’s total sales in 2022, will play a bigger role next year as Skoda begins exports of made-in-India cars to Vietnam, a market which will help Skoda and Volkswagen to get a toehold in Southeast Asia. The group has also identified some of the Commonwealth of Independent States countries and West Asia as a potential export destination.

“Our ambition is to become a substantial player by 2025-26, the year we want to have 5% share of the passenger vehicle market. We are moving in that direction,” said Arora.

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