Made in Emerging Europe

Made in emerging Europe: Škoda

Something a bit different this week: a look at Czech automobile manufacturer Škoda.

In an extremely challenging environment, 2022 was a good year for Czech automobile manufacturer Škoda.

Despite several external factors impacting the company’s financial results (the sharp rise in the price of raw materials, the ongoing shortage of semiconductors and the financial burdens from the war in Ukraine) the firm shipped more than 730,000 vehicles, increasing its revenues year-on-year by 18.5 per cent to 21 billion euros.

Operating profit was 628 million euros, down 42 per cent on 2021’s 1.08 billion euros – largely due to the negative impacts related to the war in Ukraine.

“Škoda Auto demonstrated its resilience throughout 2022,” says CEO Klaus Zellmer. “Despite the various challenges our industry is facing, we sharpened our strategic focus by unveiling a new design language and corporate identity, launching the production of our MEB battery systems, accelerating our e-mobility offensive and advancing Škoda Auto’s internationalisation.”

The Škoda Octavia continued to be the brand’s bestseller in 2022 with 141,100 units delivered to customers. Demand also remained high for the Kamiq (96,300 units) and Kodiaq (94,500 units) SUVs, followed by the Fabia (92,700 units).

Czechia as an e-mobility hub

Škoda’s move into e-mobility has indeed been swift and impressive. It has announced that it will be launching three more battery electric vehicles (BEVs) by 2026, with more to follow. Škoda says that it wants to boost the BEV share of deliveries in Europe to more than 70 per cent by 2030 and will be investing 5.6 billion euros in electrification by 2027.

In terms of component production, Škoda last year took an important step towards establishing Czechia as an e-mobility hub. In May 2022 it launched production of modular electric (MEB) battery systems at its Mladá Boleslav plant, with a second production line opening this year which will expand capacity to 1,500 units a day.

The MEB battery systems manufactured in Mladá Boleslav will not only be installed in Škoda models but also in vehicles built by Volkswagen, Audi and SEAT. Mladá Boleslav is the only European location outside Germany where battery systems for MEB vehicles are produced.

Another measure aimed at securing component supplies further demonstrated Škoda’s resilience under very challenging conditions in 2022: In the first half of the year, production of the all-electric Enyaq iV had to be suspended for eight weeks due to supply bottlenecks caused by the war in Ukraine.

To best meet customer demand and reduce the high order backlog, the car manufacturer relocated part of its Ukrainian component production to Mladá Boleslav in close cooperation with suppliers. These steps enabled manufacturing capacities to be duplicated in Europe and North Africa within only a few weeks.

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Gateway to ASEAN

Growth for Škoda in 2023 is likely to come in Asia. Having boosted sales by 127 per cent in India last year, the carmaker has now set its sights on Vietnam.

Škoda considers Vietnam the strategic gateway to ASEAN and the broader Indo-Pacific region. In cooperation with Thanh Cong Motor Vietnam (TC Motor) as a local partner for production and sales, Škoda will gradually start importing the Kodiaq and Karoq models this year, followed by the Superb and Octavia series from Europe in 2024.

Vietnam has considerable growth potential in terms of gross domestic product and unit sales, its automotive market is extremely dynamic; there are currently only 34 vehicles per 1,000 inhabitants – with a population of around 100 million people. Nonetheless, Vietnam is already the fourth-largest automotive market in Southeast Asia.

With the gradual removal of customs duties on goods due to the EVFTA (EU – Vietnam Free Trade Agreement), Škoda is anticipating a strong increase in the sale of vehicles manufactured in the Czech Republic and imported into Vietnam.

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