Saturday, May 18, 2024

Volkswagen’s Skoda Reportedly Reassessing Future Strategy in China

BusinessVolkswagen’s Skoda Reportedly Reassessing Future Strategy in China

Czech carmaker Skoda Auto, a subsidiary of Volkswagen, is reportedly considering a withdrawal from China and will make a final decision next year, according to German media outlet Automobilwoche. In response, a spokesperson for Skoda China said that the company has not made any decision on the necessity of adjusting its strategy.

“As part of the normal business operations of the company, Skoda continuously evaluates its positioning in the international market and adjusts its strategy to adapt to the development of local markets which include the Chinese market. Therefore, the company has maintained continuous and constructive exchanges with SAIC Volkswagen, our joint venture partner in China, to examine how to achieve the best positioning of Skoda in the Chinese market under the background of China’s transition to electric vehicles,” said the spokesperson.

In addition, SAIC Volkswagen, which produces cars under the Volkswagen, Skoda and Audi marques, said that all Skoda products in China are still sold normally and the team is operating as usual.

Skoda has had 127 years of operations. In the 1990s, the firm became a sub-brand of Volkswagen, and in 2005, Skoda entered the Chinese market with its models produced by SAIC Volkswagen.

Because it comes from the same platform as Volkswagen, Skoda has always been known as a brand that is cheaper than Volkswagen in China, grabbing a certain share of the market by virtue of its cost performance. In 2007, its first model, the Mingrui, was launched and sold 31,800 units. From 2016 to 2018, Skoda sold more than 300,000 vehicles in China.

However, with the maturation of China’s auto market, the rapid growth of independent brands and the increasing popularity of NEVs, Skoda’s sales have fallen. As early as 2020, when Volkswagen released its third-quarter financial report, the sales leader of Volkswagen issued a clear warning: “Skoda is in trouble in China.” From 2019 to 2021, Skoda sold 282,000 vehicles, 173,000 vehicles and 71,200 vehicles respectively. From January to October this year, it sold 38,022 vehicles, down 61.32% year-on-year.

Skoda has been questioned by consumers in the country many times regarding its quality. Last year, Skoda was also reported to dissolve the Chinese marketing and R&D team, but SAIC Volkswagen dispelled this rumor.

In June this year, Skoda announced that it would start business operations in India. In October, it announced plans to sell and build cars in Vietnam, quoting considerable growth potential there. Skoda expects its annual sales potential in Vietnam to be as high as 40,000 vehicles. In 2024, a Skoda factory in Vietnam will be put into operation to assemble complete knock-down (CKD) cars.

Since 2018, automobile brands that have announced their withdrawal from the Chinese market include Suzuki, Fiat, Opel, Renault and Jeep. Cui Dongshu, the secretary-general of the China Passenger Car Association, told the Global Times that the common reasons for their withdrawal are weak localization and slow technological upgrading. As a result, they can not adapt to the requirements of market development and technological changes, and their products cannot meet the needs of consumers.

SourcePandaily
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