Skoda aims to grab a 4 per cent share in the Indian market within the next five years. To attain this goal, the company will cut prices of its Fabia hatchback by heavy localisation in the next two-three years. The plan can certainly succeed – but more importantly it strengthens rumours about VW group’s plans to set up an engine plant in India.
The reason that Volkswagen and Skoda cars feel more expensive than their competitors, is that many components of their cars including the engine and suspension are imported. The localisation in the Fabia is about 50 per cent, far lower than most of its competitors who have around 80 to 90 per cent locally procured fittings. This will certainly save VW group lot of import duty, which can be forwarded to the customers to maintain competitive edge.
The new plant for entire VW group has been in discussion for a while. Once ready, the facility will supply engines to Volkswagen, Skoda and Audi cars in India. There were reports that the new plant will be established at the existing facility at Chakan near Pune, however; VW may consider another location due to the ongoing VAT row with the Maharashtra state government. There are reports that the plant will be operational by 2014.
With the price cut, Skoda hopes to sell around 75,000 to 1,00,000 units of the Fabia in India. In fact, with localisation of engines, we can expect some price cut across entire Skoda, VW range and even entry on level Audis using 2.0-litre diesel mills.