Skoda, the Czech auto major and part of the Volkswagen group, has got the okay from the Foreign Investment Promotion Board (FIPB) for setting up a car project in the country. This was reported by a leading financial newspaper.
The company plans to invest US$ 56 m in its Indian subsidiary, Skoda Auto India Pvt. Ltd., in what is one of the largest foreign direct investment projects in the auto sector. It will kick off its venture by launching the 'Octavia', aimed at the premium segment.
Skoda's plant will be located in Aurangabad (Maharashtra) and will commence operations with an initial capacity of 10,000 units p.a. The car will hit the market in mid-2000.
After three-four years, Skoda India plans to divest stake in favour of domestic investors, which could be companies or financial institutions.
Skoda's foray in the premium end of the auto segment (Rs 700,000 - 800,000) seems to be timed just right, if September sales figures of Lancer (Mitsubishi) and City (Honda) are any indication. The company can take heart from the improved demand scenario in the premium segment. However, the good news ends there. What maybe of some concern to the company will be the future launches by Toyota, Maruti (Baleno) and General Motors, among othes, in the premium segment. This will turn the market extremely competitive and Skoda will find it difficult to withstand competition on the strength of a single model. Moreover, the company will have to take some measures to fortify its marketing and distribution network.
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