Blog: Dave LeggettSkoda on the march

Dave Leggett | 12 February 2007

The Audi ‘putsch’ going on inside Volkswagen Group raises a number of questions about the future organisation and direction of the group’s brands and where brand overlap problems may emerge. There is renewed talk of future Volkswagen brand models taking the brand upscale now that overlord Ferdinand Piech is so firmly in charge.

Leaving aside the potentially thorny issue of what that may mean for Audi positioning, a quiet success story for Volkswagen Group in the lower reaches of the market is the steadily growing sales and global presence of Skoda.

Some of you who recall the cheap’n’-not-very-cheerful tribute to automotive mediocrity that was the Skoda Estelle may be surprised to learn that the brand is now shooting for a million sales a year, with plants in China, India and Russia all adding substantial volume. Last year’s sales reached almost 550,000 units.

Of course the Czech-based firm has swallowed plenty of Volkswagen investment over the years to get where it is. But a global value-driven brand that is fully integrated, in engineering terms, into Volkswagen Group and possesses a low-cost production base looks like an attractive asset now. Skoda is well placed to grow in the developing markets that will show the highest volume growth over the next ten years.

Another positive arises as memories of the old Communist-era Skoda jokes fade in Western Europe. The Skoda brand now has a ‘VW-associate’ image and is building on solid models that have been very well received (excellent JD Power customer survey ratings) and are seen as offering a good value, highly competent basic quality package. A loyal customer base is therefore building in Europe.

In these circumstances, it can afford to just tweak its prices a little higher in markets such as the UK, enjoy higher margins and leave the bargain basement to others. That’s a nice scenario, allied to production for Europe in the still relatively low-cost Czech Republic, but there is a rub. Is the brand positioning getting too close to Volkswagen?

The new Skoda Fabia looks like a winner to me (not so sure about the quirky Roomster, but it seems to sell). New Fabia still offers those value-driven Skoda elements, but it’s a fairly sophisticated product proposition these days. To what extent will it compete for the same customers as the Volkswagen Polo? I guess Volkswagen has a different brand image, but just how different and why should Volkswagen command a big price premium over a same segment Skoda, these days?

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