Volkswagen puts small-car plan on the back burner

Launch of the Skoda hatchback, positioned below the Fabia and to be launched this year, put off for 3 years

Volkswagen (VW) has ruled out any imminent battle with Maruti Suzuki, Hyundai and Tata Motors for a slice of the low-cost compact car market in India. The largest automotive group in Europe fears a small car could lead to brand erosion, according to senior executives.

SkodaAuto, the first among the Volkswagen group brands to foray into India more than a decade ago, has thus put its small-car plan on hold. The proposed hatchback, positioned below the Fabia, was to be launched this year, but has been pushed back for another three years.

After the break-up of its alliance with Suzuki Motor Corporation (SMC), VW has not shared the launch plans for the Up!. The small car was to be positioned below the Polo, with developmental help from SMC.

Jurgen Stackmann, board member and director of sales and marketing, SkodaAuto, said, “We are interested in the segment. We are analysing the segment in our way and we have not found a conclusion to that. We are not going to be in the lower part of the industry, this is pretty clear. The Volkswagen group cannot enter the lowest part of the industry.”

The domestic car market is dominated by small cars, with four out of every five cars sold being compact cars, having a length of less than four metres. New entrants such as Nissan and Renault and established companies such as Tata Motors, Maruti Suzuki, Ford India and Fiat are working towards launching their version of compact cars.

The mini and micro segments of the small-car market — consisting of Tata Nano, Chevrolet Spark, Hyundai Santro and Eon, Maruti M800, A-star, Alto and WagonR, available in a price band of Rs 1.5-4.28 lakh — will see sales of nearly 700,000 units this year.

The base price of VW Polo stands at Rs 4.7 lakh, while that of Skoda Fabia stands at Rs 4.65 lakh (both prices ex-showroom Mumbai). Besides SkodaAuto, VW’s Audi is present in India.

Elaborating on Skoda’s plans in the compact segment, Stackmann said, “We have to first identify the concept and plan it well for India. Our current drive is to leverage investments we have just done, which have a good position to grow further in the near term, in the next two to three years, with cars coming.”

“So, it’s definitely a period after that where we would consider (the small car). So, I am not expecting any quick decision over there. We haven’t found the way to do it, the way we would like it without hurting the brand.” The company stated it was in the concept stage at the moment and no development had taken place on the small car. A few months ago, Skoda had unveiled a small car, Citigo, for India. However, with VW’s revised plan, the launch has been shelved.

VW India logged sales growth of 74 per cent at 63,426 units during April to January, while Skoda Auto’s sales growth stood at 46 per cent at 25,478 units. During the same period, Audi sold 79 per cent more at 3,381 units.