Skoda Auto Volkswagen India’s ambitious India 2.0 project, initiated in FY19 with an investment of 1 billion euros by the Volkswagen Group, is losing momentum. Despite launching five India-specific cars aimed at boosting sales and gaining market share — of which one, the Skoda Kylaq, has been an unprecedented success — the group secured just 2.44% share of the passenger vehicle market in FY26, half of its original goal of 5% by 2025.
The project was envisioned as a relaunch of the group’s operations in India, with Skoda leading the charge. It began with a phase-out of older models such as Skoda’s Rapid and Volkswagen’s Polo, Vento, and Ameo. In June 2021, Skoda launched the made-for-India Kushaq, a midsize SUV, marking the first new model under the India 2.0 umbrella. Volkswagen followed with the Taigun SUV in September 2021.
These launches led to a revival, with combined sales doubling from 31,759 units in FY21 to 65,863 units in FY22. The momentum continued into FY23 with the introduction of two midsize sedans, the Skoda Slavia in February and the Volkswagen Virtus in June. These additions helped push sales up by 42% that year, reaching 93,595 units.
But the upward trajectory did not last. In FY24, sales declined to 87,719 units, followed by a further dip to 87,098 units in FY25. This resulted in a market share of just 2.02% out of the total 4.3 million passenger vehicles sold in FY25, essentially returning the group to where it stood at the start of the project, when it held a 1.91% share in FY18.
The launch of the sub-4 metre SUV Skoda Kylaq in January 2025 arrested that decline. With 70,865 units sold — 63.5% of Skoda’s coverall sales of 111,559 units since then — it signalled a revival. But a year and a half later, its impact on the group’s overall performance has been marginal. Although the Kylaq has helped push the group’s market share from 2.02% in FY25 to 2.44% in FY26, it’s clear that one superstar model isn’t enough.
Automotive analysts point to the highly competitive market and a mismatch between product design and local expectations as key reasons for the slowdown.
In 2024, Skoda Auto CEO Klaus Zellmer acknowledged that their cars may have been “over-engineered” for the Indian market, leading to higher price tags that weakened their competitive edge. “We build a car according to our own expectations. They tend to be over-engineered. And that comes at a price tag … that weakens your competitive position,” Zellmer said, while noting that changes were being made — and the Kylaq was the first such change.
Piyush Arora, MD & CEO of Skoda Auto Volkswagen India, views this shift as a delicate balancing act. “Our product development has always been driven by safety and driving dynamics,” Arora told FE earlier this year, noting that the group is actively evaluating how to achieve deeper localisation “without deviating from our DNA.”
But model-wise sales show that the Kylaq’s popularity has come at a cost to its siblings. The slightly bigger and pricier Kushaq, for instance, has suffered a visible decline, slipping from 2,465 units in December 2024 to just 992 units in June 2026 — despite receiving a facelift in March.
Compounding this is the ongoing product vacuum at Volkswagen. While Skoda has been a volume driver, Volkswagen’s sales continue to drop. Its top seller, the Virtus, fell from a high of 2,453 units in October 2025 to just 1,195 units in June 2026. The Taigun, similarly, dipped to 1,182 units in June 2026, despite receiving a facelift in April of this year.
Arora, however, dismissed concerns of a slowdown among established models, pointing instead to product lifecycles. “Different models have different lifecycles. Some sluggishness comes as the lifecycle evolves,” he noted, expressing confidence that sales will gradually pick up as updated versions reach consumers.
Both brands are now getting ready to launch facelifts of the Slavia and Virtus, but until Volkswagen gets a Kylaq-like sub-4 metre SUV, the world’s second-largest automaker by vehicle sales and the largest by revenue will remain under pressure — from the Japanese duo of Maruti Suzuki and Toyota, the Korean duo of Hyundai and Kia, and the homegrown giants of Tata and Mahindra.
