With 7-yr turnaround plan, Skoda to focus on brand-building in India

Written by Roudra Bhattacharya | New Delhi | Updated: Sep 10 2013, 17:09pm hrs
Skoda OctaviaPlans to concentrate on premium segment, no small cars on horizon (AP)
Czech car maker Skoda has adopted a major seven-year turnaround plan in India, under which it has decided not to look at volume growth till 2016 and focus on the premium car segment instead of the mass market of small cars. The idea is to concentrate on brand-building in order to improve its reputation of poor after-sales support, which is believed to have contributed to a sharp drop in sales over the last year in FY13, Skoda's domestic volumes had dipped 15% (to 29,067 units) while sales in April-July FY14 are already down 46% (6,989 units).

Sudhir Rao, MD, Skoda Auto India, told FE that in the past year the company had been evaluating its strengths and weaknesses and has now devised a plan for the short and medium term. Our strengths are our products, our weakness is the often-stated customer service and after-sales. Our strong focus is now on eliminating that weakness. That will put us back in a very strong position from a brand perspective, which then sets the foundation for growth. So the sequence has reversed, its now about focussing on products, eliminating weaknesses and going for growth, he said.

This strategy will play itself out over the next seven years, till 2020. There are obviously milestones in between. To fix (the weaknesses) is a two-three journey. The message I want to send out to the market is that we have strong products and that we are turning this company around in terms of all its negatives, he added.

The start of this new strategy will see Skoda, a Volkswagen group brand, bring back the 'Octavia' brand in the next few weeks in the form of a new mid-size sedan. The brand is important, since the Octavia sedan was the first brand for the company when it entered India 12 years ago and still has strong recall with consumers, but it was later replaced with the Laura.

Incidentally, this development comes a few weeks after the company decided to temporarily pause the production of the Fabia hatch at the Chakan plant near Pune. The Fabia was the only small car sold by Skoda in India, but had seen its sales dip 51% to 812 units in April-July FY14. Skoda also sells three sedans Rapid, Laura and Superb, apart from the Yeti SUV.

Under its plan to improve customer experience, Skoda is improving stocking levels (of parts) at dealerships, the skill levels of dealers and the turnaround time for technical questions. Flying doctors have also been appointed who can quickly reach dealerships.

We are basically first winning back the trust in the brand, building customers confidence and connect and then starting to bring in products that are very competitive both in terms of appeal and cost. A lot of this is basics and and we are taking some fundamental steps. We are explaining to our guys that this is important for us, for the brand. We cant continue like this and this has to be fixed, Rao said.

Skoda is also pushing for further 'India-focussed' development of new products. So far, we have not had enough Indian input in product planning upfront, but now these inputs are coming in way ahead in product development. We are a lot more demanding (with the global headquarters) as to what we want for India, he said.

Interestingly, Rao said that the company will not look to increase exports, unlike other carmakers like its parent Volkswagen and rivals Renault, Hyundai and Maruti Suzuki, for whom such a move is important to offset the negative margin impact of a weak rupee.

Skoda is clearly responsible only for the market in India. Many companies are looking at exports because they are at a curve where they want massive volumes. For us, that is a longer-term objective, he said.