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PRAGUE -- At the end of August, Skoda’s third CEO in three years took to the stage of the O2 arena here to address the Czech automaker’s persistent dilemma: How to differentiate itself from other VW Group brands and outside competitors without harming a long streak of healthy profit margins.
Klaus Zellmer, the former VW brand sales chief and longtime Porsche executive who took over at Skoda July 1, unveiled a concept previewing a flagship seven-seat electric SUV -- complete with an updated logo -- that will also set a new design course for Skoda.
The blocky and simple "modern-solid” look of the Vision 7S concept will appeal to Skoda’s core target market of adventurous families, without taking buyers from the likes of VW, executives told the audience.
"We are not after VW passenger car customers,” Zellmer told Automotive News Europe at the event. "We want to attract customers that are not within the wider group. This is why we have made the design so different from where we are today.”
Skoda’s success in selling its value-first, Czech-built hatchbacks, station wagons and SUVs across Europe has led to profit margins that have consistently beaten those of the VW brand (see interactive graphic, below). Skoda has also far outperformed VW Group’s Spanish brand, Seat, which sells at a similar price point.
Tapping into cheaper Czech labor and utilizing economies of scale from VW Group platforms and technologies has been a winning combination -- but it has also reportedly led to friction within the German parent group.
VW workers in Germany have in the past called for some Skoda production to be moved there to fill unused capacity, and also for Skoda to pay higher royalties for using common platforms.
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ASEAN Sales & Production Commentary- August 2022
Light vehicle sales in the Association of Southeast Asian Nations (ASEAN) recorded about 250,000 units in July 2022, an increase of 53.0% compared with July 2021. In the year to date (YTD), the market increased 24.0% to around 1.81 million units. The ASEAN market should increase 3.6% to 2.87 million units in 2022.
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One suggested direction for Skoda is that it become a rival to Renault’s low-cost Dacia brand.
In 2019, the German press reported that VW Group CEO Herbert Diess had suggested that Skoda be moved down market; last year, the group’s head of sales at the time, Christian Dahlheim, said the brand was "ideally positioned to tackle segments where people are not able to afford higher-priced cars."
Skoda, however, has strongly resisted any attempt to move the brand downward. The unveiling of the Vision 7S was another forceful message from Skoda that its future in Europe will be a continued rivalry with mainstream brands such as Renault, Ford, Peugeot and Hyundai and Toyota, and not just among the entry models.
Klaus Zellmer was named CEO of Skoda in April 2022. He took over the job July 1. He was formerly in charge of sales at VW brand.
Indeed, Skoda has shown it can compete and win in the biggest segments where its rivals struggle. The Kodiaq midsize SUV, for example, is the clear leader in its segment this year with sales of 42,660, almost double that of the closest combustion engine rival, the Peugeot 5008, figures from Dataforce show.
Zellmer pointed out that half of those Kodiaq sales were the seven-seat version, which he said indicates demand for a full-electric equivalent. "We see a clear market out there for a car like that,” he said.
During his speech in Prague, Zellmer promised a further 7.6 billion euros ($7.5 billion) of investment in electric mobility and 700 million euros in digitalization by 2026. He also announced three new EVs, including the seven-seat SUV to be sold alongside the current Enyaq iV coupe and crossover by the same date.
The Vision 7S, a seven-seat concept shown at the end of August, previews one of three new EVs coming from Skoda.
EUROPEAN MODEL LAUNCHES
Late 2023: New Superb midsize
Late 2023: Kodiaq midsize SUV refresh
2024: Octavia compact refresh
2024: Compact EV SUV below Enyaq iV
2026: Small EV (potentially called Elroq)
2026: Flagship 7-seat electric midsize SUV
2027: Compact EV hatchback*
Source: Skoda; *LMC Automotive estimate
The first will be a compact SUV smaller than the Enyaq coming in 2024, while the second, expected in 2025, is a small car based on VW Group’s MEB Entry platform and announced earlier this year for production in Spain.
By 2030, Zellmer forecasts 70 percent of Skoda sales in Europe will be EVs, the same ratio as VW Group overall in the region.
Skoda’s established timetable for rolling out new electric cars is the best proof that the brand’s position is secure within the VW Group, said Sammy Chan, an analyst at LMC Automotive.
With Seat losing out on EVs to its more upmarket offshoot, Cupra, Skoda can now rest easy.
"Skoda's EV planning secures its spot in the VW Group as Volkswagen's closest relative,” Chan said.
The acceleration in Skoda’s EV plan is evidence of the electric momentum in Europe as brands start tackling mass market segments, Patrick Hummel, analyst at the bank UBS, wrote in a note. "The challenge still remains how automakers can source enough batteries and raw materials,” he said.
Skoda's sales goal is to be fifth among volume brands in Europe, sales head Martin Jahn said at the Prague event. Skoda now sits in seventh place, behind Hyundai and Ford, after a tough seven months during which supply chain woes cut sales by 23 percent.
Sales of the brand’s best-selling Octavia hatchback and station wagon have fallen 43 percent this year, according to figures from Dataforce, after production was further hit by a February fire at a Grupo Antolin factory making door panels for the compact family.
Despite the sales knock, Skoda’s first-half revenue was up compared with the same period in 2021, indicating a stronger mix led by models such as the Kodiaq, which saw sales climb 2.4 percent, and the Enyaq, up 47 percent.
Skoda's best-selling nameplate is the Octavia, with 200,771 sales in 2021. Of those, 111,513 were station wagons (left) and 89,258 sedans. But overall sales of the compact family are down this year.
Slump in China
While the brand’s future in Europe looks secure, its position overseas is much more complex.
For much of the last decade up to 2020, Skoda’s biggest single market was China. The country accounted for up to 30 percent of the brand’s sales, but last year that figure had dropped to 13 percent, with just 54,401 cars built there.
The brand’s dramatic collapse in China has continued this year with sales of just 27,675, down 65 percent in the first seven months, according to data aggregator Bestsellingcarsblog.com.
So important has China been for Skoda that it designed market-specific models such as the Kamiq GT and Kodiaq GT, sportier versions of current SUVs. In total the brand has nine models on sale from four different production plants operated by VW Group joint venture companies, but those levels are clearly not sustainable.
Skoda sold just 507 Kodiaq GTs in China in the first seven months of this year, for example.
"Our European strategy is clear, it’s our key market. For China we need a new strategy,” Jahn told Automotive News Europe. He would not be drawn into whether one option was to leave the market entirely.
The brand was at least profitable in China this year, Jahn said. "We were losing money, but now we are in the black for 2022. We focused on profitable models and we did not push volumes,” he said.
The rise of domestic brands in China have hit many foreign volume-oriented automakers, but Skoda’s lower price positioning there has left it particularly vulnerable.
"China is a competitive battleground at the moment, and we have seen a lot of price competition,” Zellmer said. "We have not made a decision [about what we will do] but this is our homework.”
The loss of China’s volume has meant Skoda has backed away from its 2018 target of 2 million sales by 2025. The year it made that prediction represented its peak of deliveries at 1.25 million, before China’s collapse, the pandemic and subsequent supply chain shocks cut 2021’s delivery figure to 878,000.
How to approach growth outside of Europe is one of Skoda’s most pressing concerns. "We need a solution. Not just for China but for the rest of world,” Jahn said.
Potential in India
One market that is taking off is India, which in the first half of 2022 overtook China to become the brand’s third-largest market, after Germany and the Czech Republic.
Skoda sold 33,387 cars in India through July, according to data from Bestsellingcarsblog, up 292 percent, following the launch of the new Kushaq small SUV and Slavia small hatchback.
Skoda developed the cars on a heavily localized MQB-A0 platform aimed at emerging markets with less stringent emissions standards such as India.
The evolution of MQB-A0 represents the start of a wider strategy push into new markets after Skoda last year was handed the responsibility for developing the combustion-engine platform for the whole VW Group to compete in price-sensitive markets. VW has since launched the Taigun SUV on the platform in India.
"We see huge potential to grow in emerging markets," former Skoda CEO Thomas Schaefer said last year, citing Vietnam. Other potential markets include Brazil.
It is unclear how much sales growth Skoda can realize from the platform. A long-rumored VW factory in Southeast Asia has not yet materialized, and in July Skoda halted production at a Russian factory in Nizhny Novgorod run by Russia’s GAZ Group as a result of the war in Ukraine.
The plant built the Octavia, Karoq small SUV and Kodiaq, while VW also shut its plant in Kaluga that built the Rapid compact for Skoda.
Russia was a big market for Skoda. It was the sixth-biggest brand there in 2021 with sales of 90,443, according to data from the Association of European Businesses.
Skoda executives have set strict conditions for any relaunch in Russia.
"The war would have to end with acceptable outcomes for all parties, the sanctions would have to be lifted, and the logistics would have to work,” Jahn said. "Under these conditions we would consider [restarting production].”
For now Skoda has returned to being primarily a European brand, where its prospects are strongest. But there are still headwinds here for Zellmer.
The heavily unionized workforce in the Czech Republic, home to its Mlada Boleslav and Kvasiny plants, is in a strong position to push for wage increases and it is difficult to reduce headcount there, hampering cost-cutting efforts.
The VW Group has also yet to greenlight a rumored battery plant in the Czech Republic to supplement its growing network of announced European locations.
But showing off a future seven-seat electric SUV with a large 89 kilowatt-hour battery pack, unique styling and no direct VW brand rival could be just the thing to nudge the battery plant decision in Skoda’s favor.
Interessante articolo sulla situazione strategica di Skoda. Il marchio ceco ha da decenni un ottimo successo in Europa, anche troppo per i cugini di Wolfsburg ma al di fuori del continente le cose non sono andate benissimo.
La Russia era un mercato su cui Skoda puntava molto ed adesso non ci sono speranze. Nell’ India stanno crescendo ma rimangono un player minore,
In Cina hanno subito un collasso e il rischio di dover abbandonare il mercato non è basso.
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