Last December, Škoda Auto Volkswagen India Private Limited (SAVWIPL) entered the crowded sub-4 m SUV segment with the launch of the Kylaq. With the vehicle being manufactured at the company Pune plant, deliveries started this January. The Kylaq is the third vehicle from Škoda to be both developed and produced locally and is based on the made-in-India-for-India MQB A0-IN platform, also the basis of the SUV Kushaq and the saloon Slavia.
SAVWIPL followed up the launch of Kylaq with the launch of the SUV Tiguan R-Line in April, and the upcoming launch of the hatchback Golf GTI on May 26; both are being brought into India as completely-built-up (CBU) units. These launches demonstrate the strategy SAVWIPL is following for the Indian market: Importing global products in specific segments, while developing and manufacturing products for others.
Although the India-made Volkswagen Virtus was the highest selling mid-size sedan in FY2024-25, with a clear lead over the Honda City and the Hyundai Verna, SAVWIPL’s vehicles trail far behind competitors in the 4-m and 4.4-m SUV categories. The sub-4 m SUV category that SAVWIPL has now entered is the most competitive one in the Indian automobile industry, with leader of the pack Maruti Suzuki selling about 3.64 lakh units in FY2024-25. It is still very early days for the Kylaq, and SAVWIPL says it has received 30,000 bookings, while SIAM data shows it has sold 10,205 units till the end of March.
After more than 20 years in the country, what will it take for the German automakers to gain more share in a market where both old and new Asian rivals such as Hyundai and Kia have captured the imagination, and wallets, of customers? In a conversation with Forbes India, Piyush Arora, MD & CEO of Volkswagen-Skoda India, talks about bringing more products to the Indian market, maintaining its focus on exports, and making investments of Rs 10,000 crore in India over the next decade. Edited excerpts from an interview:
SAVWIPL is committed to conducting business responsibly, in accordance with the regulations, and we have been cooperating with the government. We have done business in India for more than two-and-a-half decades; we have invested close to Rs 15,000 crore in the country in these years. Of course we have our classifications, and we are addressing our differences with the [government] department.
We have plans to grow in the country and continue to look at opportunities to bring in more products, including locally manufactured ones, on which we are highly focussed.
Under our India 2.0 programme, over the last 5 to 6 years, we have engineered and developed products in the country; we have expanded that portfolio even in the most crowded segment—almost 30 percent of the market—the A00, sub-4 m segment. We have entered this segment now with the Kylaq. We have brought the Golf GTI and the Tiguan R-Line into India. We showed a lot of our global products from Skoda at the Bharat Mobility [Global Expo]; we are going to launch Kodiaq in the second quarter of this year.
Q. The Golf GTI is a CBU, as was the T-Roc, which you brought into India a few years ago. How do you decide which models should be CBUs and which should be localised?
In our group portfolio, we have five brands—Skoda, Volkswagen, Audi, Porsche, Lamborghini—and almost 40 different cars. We cater to market requirements from less than Rs 1 million going up to almost Rs 80 million. India is the world’s 3rd largest auto market, but 50 percent of it is sub-4 m. Our focus is on the volume and premium volume segments, where, in the past 5 years, we have developed and engineered products in India through localisation and utilisation of the ecosystem. With the Skoda Kushaq and Slavia, VW Taigun and Virtus, we engineered and brought in products that had 90 percent localisation.
These products are also for exports. We have focussed on exports from the very beginning and are exporting almost 35 to 40 percent of our capacities to regions including Mexico, the African continent, the Middle East, and now Southeast Asia.
Alongside our localised products, we will continue to bring our global products into India, depending on market demand.
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Q. Do you have a target for your exports? How much of your sales are expected to come in from exports?
Our strategy of focusing on export markets stays. From the time of our inception, almost 675,000 cars have been exported; we are the fourth largest passenger vehicle exporter in India. In the Indian automotive industry, between 10 and 15 percent of 4-wheeler capacity is being exported, and the government wants to achieve 25 percent by the turn of the decade. We are already exporting between 25 and 30 percent. While focusing on growing our share in the Indian market, we will continue to maintain our export aspirations of 25 to 30 percent.
Our biggest export market is Mexico, apart from that there is South Africa; we have started exporting to the Middle East as well. As part of our CBU unit exports, we are also now looking at bringing our India-developed product into Southeast Asia; we are looking at making Skoda products under the India 2.0 programme in Vietnam as well. Export of components that we have developed in India has started, with a ramp-up taking place in Vietnam. That is the next level of opportunity because, considering trade restrictions, this business-model is better suited for the Vietnamese market.
Q. What's the growth you're targeting within the domestic market?
When we launched the India 2.0 programme, we were able to address 30 percent of the addressable market with four cars, and our global portfolio. Now with Kylaq in the sub-4 m category, we are adding another 30 percent of the addressable market. So, we are able to address almost 60 percent of the market, which is 4 million-plus. In this, we want to take our market share at least to 4 percent.
We recognise that India is a highly product-driven market, and if we want to grow our market share, we need to bring in more products. In this phase we have to bring in EVs as well as internal combustion engines. The medium or immediate goal is to go beyond 5 percent market share. But, of course, that's not the end aspiration.
Q. Last year, there were some talks about VW looking to work with an Indian partner. Is that plan still in play?
Globally, Volkswagen Group has entered partnerships in different regions with different strategies. Whether it is a channel partner, technology partner, or financial partner, and so on. Looking for a partnership in India is not something new, and any partnership that works towards our aspirations for the Indian customer and growth would be a win-win opportunity. If there are opportunities for partnerships, they will be evaluated, but our go-to market strategy is to bring in more products.
Q. What are your plans in the EV segment?
While we focus on bringing global EV products to India, which you already see from our brands Porsche or Audi, we are also looking at the volume segment. For this we are identifying which would be the best-suited platform from our global portfolio that we can indigenise.
We will have investments going into product development, supplier development and upskilling of people and facility upgrades. We would be investing another Rs 10,000-plus crore in the turn of the next decade. We have played a vital role in the development of suppliers in India, and we are looking at the same process for EV components also.
Q. Companies like Kia have captured much of the market by offering attractive features. How do you plan to counter this?
Fifty percent of the market is the sub-4 m market, and that is where first-time buyers are concentrated; the remaining 50 percent are those who are upgrading and they understand and value better products. Customer preferences are evolving, and in India customers get attracted to a lot of features and options.
As a group, safety remains our DNA, as also driving comfort and driving dynamics. We were the first ones to be 5-star rated in passenger safety as well as child safety in the global NCAP system. With the Bharat NCAP rating system getting implemented, Kylaq meets the passenger and child safety requirements. This remains the focus.
But we are also catering to and understanding features that are the Indian customer’s requirements and we'll be addressing them as well. So, while meeting Indian customer needs, we would not deviate from our DNA of safety, driving comfort and driving dynamics. That’s what defines the group.