THE most telling joke from the bad old days of Skoda ran like this: How do you
double the value of a Skoda? Answer: by filling its tank with petrol.
Perhaps, with the price of fuel where it is today, that is no longer a joke.
Certainly, the cars that come from the Czech manufacturer are now taken
seriously and have become recognised as well-made, reliable and good value
for money.
In today’s brand-conscious world, Skoda comes closest to a classless “people’s
car”, the idea behind the original Volkswagen.
And it is Volkswagen, which is now an aspirational brand in its own right,
that has wrought the revolution at Skoda.
The German giant first became involved in 1991 when the Czech and Slovak
republics were one country and Skoda was state-owned.
Initially Volkswagen had only 30% of Skoda but incorporated it as its fourth
brand, alongside VW, Audi and Seat. Its share-holding increased to 70% in
1995 and by 2000 Volkswagen had acquired full control.
The timing was fortuitous. Volkswagen was already well established at Skoda
when rival manufacturers began eyeing low-cost production sites in newly
democratic central and eastern Europe.
When Volkswagen arrived, Skoda had only one model and its factory at Mlada
Boleslav produced 170,000 cars a year, most of them sold in the eastern
bloc.
Gradually, Volkswagen components and processes were introduced and Skodas
became restyled VWs with a different badge – and a lower price.
Last year Skoda sold a record 630,000 vehicles worldwide and now it is aiming
for a million. At its present rate of growth – more than 10% a year for the
last three years – it will exceed 1m cars a year by 2012.
Reinhard Jung, Volkswagen’s production and logistics expert who was appointed
chief executive of Skoda last October, said maintaining growth depended on
widening the product range and increasing Skoda’s presence in new markets.
Introducing his latest model, the Superb, a rival for the Ford Mondeo and
forthcoming Vauxhall Insignia, Jung said: “A full range is key if a
manufacturer is to retain existing customers and attract new ones. The
Superb is vital because it allows Skoda to grow by taking our customers with
us. It shows we can offer more than just small cars.”
The Superb also shows how far Skoda has come from rebadging VWs. For the
second generation of cars under German management, Skoda was allowed more
independence from Volkswagen headquarters at Wolfsburg. It built its own
research- and-development centre, which will soon number 1,500 engineers,
and had the freedom to mix and match component modules from the Volkswagen
empire and develop unique Skoda features.
The result was a clearer separation of the latest Octavia and Fabia models
from the VW Golf and Polo, on which they are based. Skoda was able to go its
own way with the quirky Roomster estate car and the Superb, which, using
mainly Golf components, manages to provide more interior space than either
the VW Passat or Audi A6. It also has a novel twin-door system that converts
it from a conventional saloon to a hatchback at the touch of a button.
Jung is realistic about Skoda’s place in the auto hierarchy: “We try to
provide interesting and useful features for the consumer. It is not our job
to be a leader of technology, like Audi. The price-value relationship is
always an important point for Skoda.” Buyers seem to appreciate that. In the
UK, where it sold 39,900 cars last year, Skoda regularly scores high
approval ratings. It came second, behind Lexus, in the 2008 JD Power
customer satisfaction survey.
So, while it is expanding at the top end of the market with the Superb and
Yeti crossover 4x4, to be launched next year, Skoda has also made sure it
will have a version of Volkswagen’s forthcoming low-cost small car.
The big three areas for growth are India, Russia and China. India is
particularly interesting. Volkswagen nominated Skoda as the most suitable
brand for India eight years ago and, because it was unknown there, the car
carried none of the baggage of its shoddy communist-era reputation. An
assembly plant was built and the Octavia was soon regarded as a premium
saloon.
There are hopes this can be replicated in China, where Skoda began selling
last year - although its presence there was preceded by Volkswagen and Audi.
In Russia Skoda’s cars were imported and therefore disproportionately
expensive; however, an assembly plant shared with Volkswagen was set up last
year and sales have already doubled.
Unlike most of its competitors, Skoda still sees opportunities for expansion
in Europe, partly because it will have a wider range but also because of an
upgrade in its products.
It expects the Superb to sell twice the 20,000-a-year its previous model
achieved. That was a mildly-restyled version of an older VW Passat but the
new one has a character of its own and can claim to be fully competitive
with the larger saloons of other volume manufacturers. To maximise its
chances in this closely-fought sector, Skoda will also introduce an estate
version.
Skoda has now spread to 100 countries and these days decides for itself where
to start selling. Australia is its newest market.
Volkswagen, however, has to approve the move into new territories and often
provides the back-office functions.
Skoda is the Czech Republic’s biggest business in terms of sales and exports.
Its revenue in 2007 was £7 billion - up 9% on the previous year - with an
operating profit of £630m, which wasa 35.5% improvement on 2006.
Volkswagen made a good call when it moved into Skoda after Czechoslovakia’s
1989 Velvet Revolution ended communist rule. Renault had also bid - it
wanted to build its cheapest car, the Twingo, there - but the Czech
government preferred Volkswagen’s pledge to develop a wider range of models.
Now, 17 years later, history is repeating itself. After annexing the Dacia
car business in Romania, Renault is to take a 25% share and management
control of AvtoVaz, the Russian maker of Lada cars.
The Czech Republic is proud of its engineering heritage. Before the second
world war Skoda and its predecessor, Laurin & Klement, were highly
respected car makers. Cost constraints, poor materials and process control
saw its reputation dive in the communist era and for a while after the
takeover it was uncertain whether Volkswagen was serious about reviving the
brand.
It had looked as if Skoda’s three plants in the Czech Republic would make VWs,
taking advantage of labour rates a quarter of those in Germany.
Now the tables have turned, however. Skoda is at full capacity and Volkswagen
helps to meet growing demand for its best-selling model by building Octavias
in the VW factory across the border at Bratislava, in Slovakia.
Skoda is on a roll - and that’s no joke.
