New strategy propels Skoda into Far East

With 'simply clever' as their theme, affordable cars with spacious interiors become part of formula

Mlada Boleslav, Czech Republic. Sales and marketing are his favorite topics. But occasionally, Detlef Wittig enjoys a little straightforward math.

"In 1991, Skoda was already active in 30 countries," he said, referring back to the year that Volkswagen first took a stake in the Czech firm. "Today, we are selling our vehicles in 85 countries."

The export share for the Skoda lineup has risen from a weak 28 percent to 86 percent over the same time period. Volkswagen's stake in the carmaker rose from 31 percent to full ownership in 2000.

Both firms have profited immensely from the changes.

VW group Chairman Bernd Pischetsrieder doesn't contest this -- far from it. "Skoda is our life insurance against the onslaughts of the Koreans," he said shortly after taking the firm's top job in 2002.

But since then, competition in the global auto industry has kept increasing.

Besides the Koreans, many Japanese manufacturers are gaining market share in key markets.

Meanwhile, Skoda sales have stagnated for too long. Experts such as consultant Ralf Kalmbach are sure Chinese automakers soon will begin competing globally.

VW wants Skoda as a counterweight. That's why Wolfgang Bernhard took his first official trip to Skoda headquarters in Mlada Boleslav soon after becoming chairman of the VW brand group, which includes VW, Skoda, Bentley and Bugatti.

Inside Skoda's Pentagon -- aptly named for its unusual architecture -- the firm's executives presented a series of plans designed to give the company a burst of growth.

Wittig has been honing his plans for "an area strategy" for some time. "We have a clear pull to the East," he said. Right now, he is especially intrigued by the potential in the East Asia.

A few weeks ago, Skoda reached an agreement with Shanghai Volkswagen for the licensed production of the Octavia lower-medium car. Its assembly will begin in 2007. Skoda exports from China are not being ruled out.

Skoda is preparing a special version of its Fabia small-segment car for the booming Indian market. Construction kits for the notchback's assembly are expected to be packaged and then sold in India this year.

The Octavia and the Superb large-segment car already are being built in an Indian complete knockdown kit assembly plant at Aurangabad.

"We are also undertaking very promising negotiations in Russia and Kazakhstan," Wittig said.

With only 27,600 vehicles sold in its Asia region, the territory is still relatively undeveloped. But with sales rising more than 24 percent in 2004, Skoda has branded the area as an up-and-coming market.

Broadening the model lineup

To increase the potential for growth in the Far East and other regions, Skoda engineers under Harald Ludanek, the head of technical development, are hard at work on new concepts.

"This way, we are staying close to the firm's slogan, which has served us well so far," he said. That theme is "simply clever," and it calls for roomy, flexible, useful vehicles at affordable prices.

That's the kind of vehicle the Roomster -- Skoda's fourth model line -- is intended to be. Its introduction is scheduled for 2006.

Wittig wants to sell between 50,000 and 100,000 units of the small minivan a year.

That would be a big contribution to his goal of taking Skoda's current output of 450,000 vehicles a year to 600,000 by 2008 or 2009.

A little later, the Yeti small SUV could join the Skoda program. The firm presented the concept for the car at the Geneva auto show in March.

"After the positive reaction, we are now making the Yeti a real project," he said.

Wittig isn't worried about Skoda for the near term, either. "In a difficult environment," he said. "we will grow slightly in 2005."

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