Want to be profitable irrespective of the numbers: Skoda Auto Volkswagen MD

In an exclusive interview with Business Standard, Skoda Auto Volkswagen India MD discusses the company's export and EV plans

Skoda Auto Volkswagen India has been riding high on the four new models it launched as part of the group's India 2.0 strategy. Piyush Arora, Managing Director, who took the top job in March 2022, tells Shally Seth Mohile that the company is encouraged by the response to new models that have helped it reach record volume and expects to be profitable soon. He also touched upon export and EV plans. Edited excerpts

How have the first six months been for you? What are your top priorities?

It has been a very exciting time. The group has grown rapidly in the first half of this year. We have achieved almost 200 per cent retail growth. This has been predominantly driven by the INDIA 2.0 products and the strategy under which we launched four models in the last 12 months. Even our luxury brands– Audi, Porsche and Lamborghini, are all doing well right now. Our product portfolio is very strong, and the market acceptance has been high.

We have finally launched all the products, and now it's time for us to consolidate that. We are focused on making our operations sustainably profitable in the long term and ensuring that we achieve and penetrate the market share that we aspire for through our INDIA 2.0 project.

When do you expect to be profitable? What kind of volumes will you require to be able to break even?

We want to be profitable irrespective of the numbers. That's what we are working on, and we are very close to that. I would say that we should be profitable in a very short time, but the aim is, as I just now said, that we have to get a little independent.
 

If something like Covid-19 hits, then drastic reduction takes place, but some volume elasticity should still keep us profitable, and that's the aim we are working towards. Looking at the efficiency gains we have seen in the last few months; I see us achieving that.

When do you think you will achieve a 5 per cent market share? 

As early as possible. We have gone up to 3 per cent from below 2 per cent. All the products are now available or have just been launched. Give us a few quarters more.

 

What more do we expect under India 2.0 in the current year?

In addition to ramping up production of the recently launched models for the domestic market, we are focusing now on export markets. At the beginning of this year, we started exporting the T-Cross. We have now also commenced the export of Virtus and Skoda Kushaq left-hand drive cars and shipping these cars to almost 44 different countries. We have added some new countries to our export product and market portfolios. The focus for this year would remain to minimise the wait time for the customers for the second half of this year and meet some of the export market requirements while consolidating and working towards efficiency improvements.

What are your EV plans for Skoda and Volkswagen brands?

We have already introduced the Porsche Taycan and Audi e-Tron as part of the group's top-down strategy. They have been accepted well in the Indian market. We want to further consolidate and remain at the forefront of electrification in the country.

We are also looking at EVs from both Skoda as well as Volkswagen brands and evaluating the opportunities for these two brands in the Indian market. As part of our study, we have brought some Skoda electric vehicles into the country to test and do experimental driving with them. We are doing that predominantly in Pune and Mumbai.
 

The approach can be very similar as we have followed with the luxury brands. We bring FBU (fully built units) cars first and then look at the possibility of locally manufacturing them through the parts and components route.

When does one see it coming?

The EV market and the ecosystem are still at a nascent stage. Once we see that more customers are looking for EVs, we will see how fast we can bring them, which can then be locally manufactured in the country and help us gain more market share. We will likely get them in the second half of the current decade.

How has the group benefitted from the merging of the three legal entities?

Working together as one unit and legal entity has brought tremendous benefits. Overall operational efficiency has increased, which can further be optimised going forward. The other aspect which has worked for us as a group in the country is the high degree of focus arising from the regional strategy of Volkswagen group now to make different brands responsible for different regions.

There are different regions defined under the VW group where different brands lead, like Volkswagen leads North America, while India, Russia and Africa are led by Skoda Auto.

In addition to locally made, competitively priced models, what else is driving the sales momentum?

We have been able to capitalise on our competencies, which were developed over a period of time, whether it is parts and components, business, or localisation strategy. India 2.0 project gave us a clear chance to build up on our supplier base on which we had already started working. This gives us the next impetus to develop more competence and suppliers and utilise the supplier base for component export to our various global plants.