Q&A: Skoda well-positioned for Asian markets, says veteran consultant

Munich. For the past 18 years, Ralf Kalmbach has worked as a consultant to automakers and suppliers. Automobilwoche spoke with him about the challenges in emerging markets and prospects for Skoda in the Far East.

Within the Volkswagen brand group, Skoda is supposed to help with the development of emerging markets. What does the company have to offer?

The Skoda brand stands for attractive, high-value vehicles at low prices in many of the so-called emerging markets. The sheer size of a car is much more of a status symbol in China or India than it is here. And, as a classic notchback, the Superb and the Octavia in the Skoda lineup satisfy the tastes of the Asian consumers.

So Skoda's history of small, indifferently manufactured small cars coming off socialist production lines no longer threatens the brand's prestige?

No, it doesn't. Skoda is a respected, foreign brand in these markets today, and its products are desirable. This is even true when the cars are assembled out of CKD (complete knockdown) construction kits.

Incidentally, even in western Europe, there are very few consumers left who associate Skoda with themes dating back to the Iron Curtain. The transfer of expertise from Volkswagen did both the technology and the image good.

VW's top management is taking great pains with the China market. What should be done?

Actually, VW isn't the only company facing problems in China. Everyone, including consultants like me, has overestimated China as a market. A more important point is that the Chinese government has tried to cool its overheated economy. Just from 2002 to 2003, the Chinese auto market grew 73 percent. That was unhealthy from just about every standpoint. And its growth potential has been misjudged many times over.

For the current business year, we are estimating about 2.7 million new registrations in the Chinese market. But a doubling to more than 5 million units isn't expected until 2011. Just a year ago, these estimates were far more optimistic. These seriously reduced sales prospects have forced manufacturers and suppliers alike to revise their plans -- including Volkswagen and the Skoda management.

Chinese manufacturers, meanwhile, are also exporting their products. Is a powerful competitor for established auto companies emerging there?

I am convinced of that. By 2010 at the latest, Chinese car manufacturers will be playing a significant part worldwide. It can even happen more quickly. Just imagine a Chinese company buying Fiat or at least forging a strategic partnership with the Italian firm.

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