With CAFE-III imminent, Škoda charts a multi-fuel path beyond EVs

The approach reflects the view that India cannot rely solely on electrification for a clean-fuel transition, according to Škoda India’s brand director, Ashish Gupta.

“Five years ago, it was widely assumed that electrification was the only way forward, but that is no longer the case—not just in India, but globally. These are shifting trends that need to be factored in when product plans are drawn up," Gupta said.

With new emission norms on the horizon as the Centre finalizes the third iteration of the corporate average fuel economy (CAFE) standards, Škoda has begun firming up its clean-fuel strategy, starting with its sub-four-metre compact sports utility vehicle (SUV), the Kylaq.

“We are currently evaluating which strategy to pursue. Alternative fuels such as flex fuel and CNG clearly fit into our plans. In the Kylaq’s segment, for instance, nearly 20% to 25% of vehicles run on CNG, which is something we are actively considering," he added.

The executive said battery-electric vehicles are also important in the Indian market but require localization. “That’s also something we are working on," he said.

Currently, electric vehicles (EVs) account for around 4% of India’s passenger vehicle market, while hybrids make up about 2.5%, according to data from the Vahan Portal. CNG-powered vehicles account for roughly one-fifth of the market, while flex-fuel vehicles are not yet sold commercially in India.

Under the new emission norms, automakers will be required to reduce emissions across their portfolios by introducing cleaner fuel technologies. Failure to comply could result in steep fines.

Škoda’s comments also follow US-based Ford Motor Co.'s pivot away from an EV-only focus towards a multi-fuel pathway that includes hybrid vehicles. The American carmaker took a $19.5 billion hit on its EV investments as part of the strategic shift.

The premiumization push

Even as it evaluates the optimal clean-fuel strategy, the carmaker believes the Indian market currently demands a premium for an all-inclusive approach that brings new features across its lineup.

In an interview with Mint, on the sidelines of the unveiling of the facelifted mid-size SUV, the Kushaq, Gupta said the success of the Kylaq, has prompted it to focus on premiumizing its lineup, as consumers across the country increasingly seek feature upgrades.

“Take a feature like a sunroof. Today, a person buying a car priced between ₹4 lakh and ₹5 lakh, and someone buying a ₹1-crore-plus vehicle, both want a sunroof. This year, as a Škoda brand, we will bring top-of-the-line features across our lineup," Gupta said.

The new Kushaq marks the company’s first attempt to upgrade its portfolio following the group’s highest-ever domestic sales in 2025, at 117,000 units—up 36%.

Gupta added that 2026 will mark one of the company’s biggest product offensives, with several upgrades and new variants planned, alongside the evaluation of new powertrain technologies.

“We are planning close to 10 product actions, including the introduction of three new global icons, two major product upgrades, and new variants across price points," he said. “We are continuously enhancing the value we build into our cars—across the Kylaq, the Kushaq, the Slavia, and the Kodiaq."

Škoda’s growth push mirrors broader efforts by foreign automakers such as Honda, Renault, and Nissan to regain ground through new product launches and expanded sales and service networks.

Though the Kylaq’s growth has given the brand a much-needed boost, the road ahead will not be easy, as the top four carmakers double down on product plans and capacity expansions.

Puneet Gupta, director at automotive intelligence firm S&P Global Mobility, said Škoda India needs a robust five-year plan to build more confidence among suppliers, dealers, and customers.

“The addition of CNG to the Kylaq will help the company attract CNG buyers, a segment that has grown into a high-volume market. However, with more regulations coming in, Škoda will also need a clear plan for electrification," Gupta said.

He added that competition among the top five carmakers has become much tougher, and Škoda must rethink its India strategy if it wants to be counted among the leading players in the market.

The company entered India in 2001, before the launch of the Volkswagen brand in 2007. In 2018, the two brands were consolidated under a single entity, Škoda Auto Volkswagen India Pvt. Ltd, to unlock synergies across the Volkswagen Group.

Škoda India is the anchor brand for the group in the country. Its other brands include Audi, Lamborghini, Bentley, and Porsche. The group operates two plants in Maharashtra—one in Chakan and one in Chhatrapati Sambhaji Nagar—with a combined annual capacity of up to 200,000 units.