Skoda is currently evaluating its position in China, with an exit from the biggest car market in the world as one of the possible outcomes in the face of strong competition. Such a move would help VW Group boost the core VW brand’s presence in China, and allow Skoda to focus on other, more profitable markets.
As reported by Automobilwoche, Klaus Zellmer, Skoda’s CEO, said: “We will look together with our Chinese joint venture partner at how we want to continue there”. Those comments follow a significant drop in the Czech automaker’s sales in China, which once was its largest market accounting for more than 30% of Skoda’s global sales. This figure dropped to 13% in 2021 and is expected to drop even further in 2022. In the first three quarters of the year, Skoda sales recorded a 31% drop in China and 22% globally.
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Zellmer said: “If we want to focus our efforts, it’s worth looking at the scenarios and then deciding”. One of these options would be for Skoda to end local production of vehicles, limiting its offerings to imported models. The Czech brand currently has several China-specific models in its range including “GT” branded variants of the Kodiaq and the Kamiq, plus a long-wheelbase Octavia Pro. All of them are produced in VW Group’s joint venture plants in China.
If Skoda decides in favor of leaving or downplaying its presence in the Chinese market, funds could be redirected to other areas of the world. The automaker is responsible for VW Group’s operations in the growing market of India, while it is also planning on expanding to Vietnam. According to Skoda, the Vietnamese market has a potential of up to 40,000 annual sales, which is why it is actively looking into opening a new factory where cars could be assembled from knocked-down kits starting in 2024.
Those moves could ease up the financial hurdles following VW Group’s exit from Russia, where Skoda was also responsible for its local operations. Speaking about the matter, Zelmer said: “The consolidation of Volkswagen Group Russia within our financial results naturally poses a particular challenge for Skoda, with a negative effect on the operating result for the year in the mid-triple-digit millions”, adding that “The future of the market in Russia is uncertain”.
In a quest to downplay rumors, a Volkswagen spokesperson told Reuters it was “normal business procedure for Skoda to continuously be checking its position in international markets and adapt that to local developments”, adding “There have been no decisions so far on possible modifications in our strategy”.
Skoda is not the only automaker that is having a hard time facing fierce competition from local automakers in China. Recently, the GAC-FCA joint venture that used to build Jeep models in China filed for bankruptcy. Also, Tesla and Mercedes-Benz have been forced to cut the prices of their EVs in China in order to be more competitive with Chinese automakers.