Skoda: Online move

Skoda wants to accept bookings for a few variants of the Fabia, a hatchback, only online and not through its dealerships. Skoda has three other cars in the market – the Octavia, Laura and Superb – but it is the Fabia that can drive volumes for the Czech automobile maker. (It plans to launch the Yeti, a sports utility vehicle, soon.)

The move is aimed at containing various costs which can add up to Rs 40,000-50,000, according to company officials. By taking bookings on the net, the company intends to pass on this benefit to the customer in an attempt to make the car more affordable. Skoda sells as many as four variants (Active, Classic, Elegance and Ambiente) of the Fabia with two fuel options (petrol and diesel). Prices start from Rs 4.74 lakh and go up to Rs 7.42 lakh (ex-showroom Mumbai).

This will not be for the first time in India that a car manufacturer has targeted the online route. Only recently, Tata Motors retailed the Nano on the net. In that case, the idea was to avoid crowds at Tata Motors dealers. It was not driven by the need to manage overhead selling and distribution costs.

The savings by going online could be vital for Skoda. One reason why Skoda is forced to price the Fabia higher than its peers, say experts, is the low localization of the car. Only about 15 per cent of the total content of the Fabia is procured from India, while the rest is imported from Europe after paying hefty duties. In comparison, cars such as the Hyundai i10 and all Maruti Suzuki hatchbacks (the Ritz, A-Star, WagonR and Zen Estillo, to name a few) have been localized more than 80 per cent. This allows such cars to carry extremely competitive price tags.

Online sale of the Fabia will allow Skoda to neutralize other related cost such as commission to the dealer, which is usually 5 per cent of the price of the vehicle, reduce delivery costs and reduce inventory as well as space in the showroom.

Due to its premium pricing, Fabia sales have suffered since the start of the current year. According to data provided by the Society of Indian Automobile Manufacturers, Fabia sales halved to 1,720 during April-August 2009-10 from 3,415 in the same period a year ago.

Sector experts do not share Skoda's optimism. Logix Microsystems Vive-president Pankaj Patel says: “If you go by the trends in the US, online sales never picked up. Buyers were scarcely interested in buying a car (or a variant of it) without the 'touch and feel' effect. Indian buyers are very particular about extracting maximum benefit from every purchase they make, which can only happen through physical verification”.

“In addition, dealers of competing manufacturers are nowadays offering discount benefits coupled with free accessories which can be as appealing or better than Skoda’s offer”, he adds. Logix Microsystemsm owns Carazoo.com, an interactive website which facilitates the purchase and sale of cars including new cars.

“People booked the Nano online because they wanted to avoid long queues and save time. The price of the Nano is a fraction as compared to most cars. All other cars demand ‘touch and feel’ for the price they carry,” Patel says.