Skoda plans new small car

Skoda Auto India, part of the Volkswagen Group, will launch a 1-1.2 litre small car for the Indian market in 2011 that will be priced below its entry level car, the Fabia.

The Fabia starts from Rs 4.7 lakh (Rs 470,000) and the new small car will be priced in the Hyundai i-10 price bracket.

The yet-to-be-named car had crossed the feasibility study stage, and was in the final stages of design, said Thomas Kuehl, member, board of directors (sales and marketing), Skoda India.

"Cars below Rs 5 lakh (Rs 500,000) constitute nearly 80 per cent of the total Indian market. India is predominantly a small car market and we have a clear strategy to grow in the Indian market," Kuehl said, adding that the size of the passenger car market should be around three million in the next five years.

The new small car will also be a completely knocked down unit, like the other models. All Skoda India models including the Superb, Octavia and the Laura are CKD units that are assembled at the company's plants in India, at Aurangabad and Pune.

Skoda India registered a 38 per cent volume growth in 2008 over the previous year selling around 16,250 cars across models. "The growth was driven by the hatchback Fabia that sold 6,800 units," admitted Kuehl. The company had been growing at a 30 per cent rate for the last four years, claimed Skoda India officials.

However, it enjoys only a six per cent market share currently in the B+ segment, while it is currently the market leader in the Rs13-26 lakh (Rs 1.3-2.6 million) premium segment with a 52 per cent market share.

Readying itself for the launch, Skoda India is also ramping up its dealer network from 60 at present to around 90 by 2011. "We plan to add 10 dealerships a year," Kuehl said.

Company officials indicated that Skoda India would now focus on penetration in the tier-II and tier-III cities that are the main markets for sub-five lakh (500,000) cars. The company is also in the process of increasing the local content in the Fabia that hovers around five per cent now.

"We now source components like wheels and horns for the Fabia from local vendors and are looking at taking it up to over 50 per cent in the next two years that will give us a definite cost advantage," Kuehl said.

He also clarified that the company had no plans of cutting down the price of the model, however.