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Skoda makes big inroads into Chinese car market
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Friday, 19 Oct 2012
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When Mr Petr Vávra, a counselor at the Czech Embassy in Beijing, recently spent a couple of days in Lianyungang, a coastal city in eastern China, he was, perhaps surprisingly, sometimes reminded of his home country.

In Lianyungang, as in many others cities in the world's most populous nation, the Czech carmaker Skoda has been making inroads into the marketplace, and vehicles bearing the company's distinctive green logo were apparently not hard to spot on the local highways.

Mr Vávra said that "I saw in just two days maybe 20 cars from Skoda, which was amazing. In the beginning, it was rare to see Skodas on the street. Now it's quite common."

Skoda began assembling vehicles in China five years ago, a key development as the manufacturer looked to move beyond being merely a niche brand in what is now the world's largest auto market, with 14.5 million passenger cars sold in 2011.

Already, Mladá Boleslav based Skoda has seen its sales in the dragon economy overtake those of certain European rivals that entered China more than a decade earlier.

Mr Klaus Paur Shanghai based global head of automotive at the market research company Ipsos said that "The brand itself was a relatively late entry into the market, and it has very quickly adopted a very strong market position."

China is now the largest market for Skoda worldwide, with the company selling 220,000 of its Fabia, Octavia and Superb models there last year, around a quarter of the brand's global sales and enough for a 1.5% market share.

In the first eight months of 2012, deliveries jumped 7.5% YoY to 159,000, ranking Skoda as the 16th most popular carmaker in China, two places ahead of Citroën, for example, which built its first factory in the country two decades ago.

Mr Paur sees the fact that Skoda is pitched below many other foreign brands in price as the key factor behind growth in China. Modest prices have helped Skoda take sales from both the budget Chinese car producers and also provided tough competition to well known overseas carmakers that charge a premium.

The close link to Volkswagen is also significant. Skodas are manufactured in China by Shanghai Volkswagen, a joint venture between Volkswagen and SAIC, formerly Shanghai Automotive Industry Corporation, which owns a 50% share in the partnership.

All foreign carmakers have to set up such joint ventures if they are to assemble vehicles locally and Volkswagen has a second tie up in China, with First Automobile Works, based in the north of the country.

According to Mr John Zeng, director of Asian vehicle forecasting for LMC Automotive, the largest contribution to Skoda's sales growth in China has come from being part of Shanghai Volkswagen. He said that "It simply reflects the consumer trusting the reputation of Shanghai Volkswagen. Skoda comes to China as one of the sub brands of Shanghai Volkswagen. I think it's more being considered as a German car. They don't really know it comes from the Czech Republic."

Indeed, before local production began in 2007, Skoda itself was largely unknown in China, with only modest sales of imported Skodas recorded in 2006, the year the brand was reintroduced into the country.

Few people remembered the time in the early 1990s when Czech made Skodas were shipped to China, and this was probably not a highlight in Skoda's history as the firm's local reputation was said to have been dented by poor after-sales service.

That is less likely to be an issue now because, despite being part of Shanghai Volkswagen, Skoda has standalone dealerships in China, about 400 at the latest count, and the company is looking to strengthen its network particularly in the south of the country.

Mr Vávra, head of the Beijing embassy's economic section, said last year that car parts valued at USD 106 million were exported from the Czech Republic to China last year, out of a total of USD 1.67 billion Czech exports to the world's second largest economy, double the amount in 2009.

He hopes the figure could increase further as Skoda looks to maintain sales growth by launching new models in China such as the Rapid, a midrange car, and the Yeti, a crossover vehicle. With just the Fabia, Octavia and Superb presently on offer, the company's range is less than half the size of that of some rivals.

Source - Prague Post


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