Power Steering

This is one success story hardly anyone has noticed. Surprising, since it's in the high-decibel automobile industry. The Czech-born Skoda Octavia, from the Volkswagen (VW) stable, has sold over 4,000 units in a year since it hit Indian roads. Good going, acknowledge even the most sceptical auto analysts. And even better for a car priced above Rs 10 lakh, which cannot advertise its Volkswagen parentage, and has a name like Skoda!

SkodaAutoIndia employs 140 people in its factory in Aurangabad where it assembles cars via the SKD (semi-knocked down) route. Says Bipin Datar, head of sales and marketing: "We think we've got an excellent response from all around considering we've kept a very low profile." And why have they avoided star-studded launch parties and mega-buck advertising, the norm in these competitive days? Simple caution and a desire to test-drive the Indian market before hitting the gas pedal. "We wanted to build a network first. And the fact that we were an unknown brand has probably worked for us. When you are a known brand, the expectations are too high," says Datar.

Skoda's strategy hinges on pricing and positioning. The Octavia comfortably sits in the space between the Hondas and Lancers on one side and the Sonatas and Accords on the other. The launch model, Octavia Ambiente, priced at Rs 10.7 lakh (up from Rs 10.4 lakh at the time of launch in November 2001), targets those who want to upgrade from a Rs 8 lakh Mitsubishi Lancer or Honda City but can't afford the next in line—a Ford Mondeo or a Hyundai Sonata, at Rs 14-lakh plus. "Skoda had to go in for aggressive pricing because it did not have a big brand to match, and anyway pricing is all important in the Indian market," says auto expert Murad Ali Baig.

According to Skoda, the Octavia is a C-plus segment car and not the top-of-the-line D-segment. But because it boasts of some D features like airbags, and is 4.53 m in length, it qualifies for this segment, which roughly starts at 4.5 m. "It has the dimensions of a C-class Mercedes but comes for less than half the price," says Baig. And if you look at the sales figures of some of the D-segment cars this year, the Octavia has raced ahead—if Sonata sold about 2,000 cars between January and October this year, and Honda Accord a little over 1,000, the Octavia notched up sales of over 3,500.

But for Skoda, the potential Lancer buyer is to be wooed as much as the Sonata owner. And one way of getting the better of competition was to price both the petrol (2-litre, 111 bhp) and diesel (1.9 turbo diesel, 90 bhp) versions of the Octavia at par. "This was a critical factor," claims Datar, adding that when potential customers ask how it was possible, he replies: "Go ask the competition why they are charging you more for diesel." For Octavia, 75-80 per cent of sales come from the diesel version. Auto analyst Veeresh Malik says that the great mileage of the diesel version—15-18 kmpl—coupled with the fact that higher-priced cars did not offer much more than what the Octavia did for less, has contributed to its subtle success.

Skoda did have a launch ad campaign—very low profile, it ran only in print and tried to build on the quality platform. Says Ganesh Subramaniam, vice president, creative services, of ad agency iB&W: "When you build cars like no one else, everyone wants to build cars like you. It was a single-line strategy. We were not addressing the auto pundit but the ordinary consumer."

One such consumer is builder R.K. Gupta, who drives an Octavia besides an S-class Mercedes. "I was the first one to buy a Skoda in Delhi (where 1,100 cars have already been sold). It's a good car and gives me 15-16 kmpl," says Gupta whose only worry is sourcing spares. On its part, the company has set up a 17-dealer network across the country, going into smaller towns as well.

SkodaAuto, committed to spending around $56 million over seven years, has already invested about $10 million, but has no plans as yet to manufacture the car locally. To make that a viable option, sales would have to go up dramatically, feel industry analysts. As of now, Skoda is planning to move from assembling SKD vehicles to completely knocked down (CKD) vehicles starting from some time next year.

It hopes to sell 7,000 plus cars in their second year of operations and will begin the new year with the launch of the upper-end L&K (after the company's founders Laurin & Klement) in January. Can this diesel car at Rs 14 lakh-plus do an encore for Skoda? Ask the competition or wait and watch.