Volkswagen India to limit Skoda's operations due to poor performance

Considering its no-so-good performance in the country, Volkswagen India might limit the operations of its sub-brand Skoda. The German auto major feels that the brand has failed to meet the expectations, despite of its long presence in the market.

Mahesh Kodumudi, president and managing director of Volkswagen Group India, said “That new strategies are being considered for the Czech car brand that was the first within the VW group to set foot in India around 2001 but has not managed to cut much ice with customers, managing a poor 0.8% share at the end of 2013-14.”

Due to the stiff competition in the domestic market from auto majors like Maruti Suzuki and Hyundai, the Czech carmaker has struggled to firm its feet. Unavailability of product in the big-volume compact car segment, is also a big reason for the under-performance of the brand. In 2013-14 Skoda's sales were restricted to just 19,959 units, against 22,969 units in 2010-11.

According to Mr. Kodumudi, Volkswagen is also thinking about the fact to pitch Skoda as a mainline player in the Indian automobile market, though no final decision over this has been taken yet. He mentioned that cost structures with regards to brand's products have to be studied to work on the way forward and there is no point in selling products without profits. However, he added that there is no plan to pull out Skoda from India, they are not even planning for its major scale down.

This report comes at a time when even the parent company- Volkswagen group has also scaled down its performance targets for India. Volkswagen has now scaled down its Indian market share target to 7-8 percent, which was early estimated to be around 20 percent by 2018.

In respect to this, “The company said that environment in India is "challenging" and it is a "struggle to find the right product and right cost structures" to make a deep cut. "It is a challenge ... (and) not an easy market," Mahesh Kodumudi, president and managing director of Volkswagen India. Kodumudi said that against the initial expectations, the VW brand failed to get a flying start in India due to heavy competition from cost-effective players like Maruti Suzuki and Hyundai. " Perhaps we made a big splash when we entered and the expectations were that we would come and conquer the market. That has definitely not happened." he added.