Almost exactly three years back, the Volkswagen Group had announced the India 2.0 project to be led by ŠKODA Auto with committed investments of € 1 billion. The first product to emerge out of that project – the mid-size Kushaq SUV – was launched on June 28.
Making the announcement in 2018, Bernhard Maier, CEO, ŠKODA Auto had said the India 2.0 project is ambitious, but achievable. Together with the Volkswagen brand, ŠKODA is seeking a market share of up to 5% in the long term, depending on market and segment development, he had said.
With the launch of the Kushaq, the company has entered the fast-growing compact SUV segment that is dominated by two Korean rivals – the Hyundai Creta and Kia Seltos.
According to the Society of Indian Automobile Manufacturers (SIAM), the overall SUV segment sales has grown on a compounded annual growth rate (CAGR) of 13%, and the contribution from SUV sales has grown from 13.5% in CY15 to 29% CY20 in the overall passenger vehicle segment.
Offering his perspective on the segment, Ashim Sharma, Partner & Group Head Business Performance Improvement Consulting (Automotive, Engg & Logistics), Nomura Research Institute said while Seltos and Creta rules the compact SUV segment, the fast-growing segment holds enough space for new players to grab their pie. Also, people from sub-compact SUV segment will graduate to midsize SUVs and at the same time sedan buyers are moving towards this segment.
For Skoda, Kushaq plays an important role in setting the stage for future products, garner volumes and establish Skoda as a mainstream player rather than a niche seller.
Zac Hollis, Brand Director, Skoda Auto India said the launch of Kushaq is a watershed moment for the company as it enters one of the most exciting segments in this dynamic automotive market. “With a world-class SUV that is ready for India, we are looking at taking the ŠKODA brand to new and emerging markets across the country,” Hollis said.
The company has launched the Kushaq at a price of INR 10.49-17.59 lakh with two petrol engines and three transmission options spread over three variants – Active, Ambition and Style. The Kushaq, Skoda’s fifth product in the market, is built on the acclaimed MQB-A0-IN platform with 95% localised content.
Creating a space
Experts tracking the segment were anticipating Skoda to price the Kushaq aggressively to undercut its Korean rivals, but the company did otherwise. Mobility Outlook spoke to various industry analysts and leaders to understand if Skoda Kushaq can break the Korean duopoly.
Gaurav Vangaal, Associate Director, IHS Markit said the segment has seen the launch of a new product after almost a year and half. “There is a space in the market for Kushaq and VW Taigun to grow. Both Creta & Seltos are on waiting period and the segment is growing, which can work in favour for Kushaq. Moreover, there are some serious Skoda buyers who will consider Kushaq over the competition.”
IHS Markit expects Kushaq to sell around 4,000 units the first few months and later settle to average monthly sales of 2,000 units. Pricing will play a key role in the long run because Kushaq is priced on the higher side of the segment.
Considering Skoda’s overall product portfolio, some analysts believe Kushaq has been well-positioned. They believe the company hasn’t really looked at the competition and has taken a top-down approach. Since Skoda already operates in high price band segments, it has a better understanding of the customers looking for a five-seater SUV.
In between the Rapid and Superb sedans, Skoda now caters to customers across a wide price band of INR 8-35 lakh. Apart from the Rapid, Kushaq and Super, Skoda sells two other products in the Indian market – the Octavia and Kodiaq SUV.
Ravi G Bhatia, President and Director, Jato Dynamics said Skoda is trying to build on its premium image. It seems to be a conscious move to have fewer volumes and become more profitable, he said.
To give a perspective, the top-end Skoda Kushaq priced at INR 17.59 lakh has fewer features than the seven-seater Hyundai Alcazar petrol, which is priced at INR 16.30 lakh. At a cheaper price point, Hyundai has offered features such as a panoramic sunroof, remote engine start with smart key, BlueLink connectivity, 10.25-inch touchscreen infotainment system with Apple CarPlay and Android Auto.
Lack of diesel engine surprises many
Moreover, the lack of a diesel powertrain on the Kushaq has surprised many. According to a report, about 64% of the mid-size SUV customers opt for diesel variants.
“With fuel prices rising, people are looking at higher mileage. The converse is also true as the gap between the two fuel options is also narrowing down. But having a diesel is a good strategy for a mass brand like Hyundai. But carmakers like Skoda are hedging the risk right away because of the volume they might get. In later stages, they must consider bringing in diesel variants,” added Sharma.
Bhatia pointed out that the lack of diesel will pose a challenge for Skoda. The mid-size SUV segment is the only segment, where diesel still plays a critical role, he said.
Guarded variant strategy?
Compared to the Hyundai Creta and Kia Seltos, the Skoda Kushaq has limited variant options.
The Kushaq is available in seven variants, including two petrol engines – 1.0 litre and 1.5 litre TSI, while Hyundai Creta comes with as many as 19 variants with three engine options – 1.5 diesel, 1.4 Kappa petrol and 1.5 MPi petrol. Similarly, the Kia Seltos too comes with three engine options. In fact, Seltos comes with two options: the HTX and GTX line offering more options to the customers.
The lack of features on the Kushaq, meanwhile, may or may not influence the purchase decision if the customer is looking for more safety and overall build quality.
One of the experts requesting anonymity said the distribution of Skoda can’t match the Korean brands. “You have fewer dealers and premium pricing. I guess, they are not aiming to sell a lot in the country,” he said.
Round-Up
Skoda Kushaq has ticked all the major boxes to expand the mid-size SUV segment and gain the attraction of SUV buyers. However, premium pricing and lack of a diesel engine might be major deterrents to it becoming a blockbuster. Apart from this, lack of features might pinch for few customers but the European car brand might have them in future upgrades.
For now though, Skoda seems to be playing a premium game over volumes.