Opinion: Why Skoda must keep its eye on the ball
The Kamiq will bolster Skoda sales in 2019
The Czech car maker needs to invest wisely to ensure long-term success
Skoda’s impressive growth in recent years has often showed up its Volkswagen Group counterparts for sales increases and profit margins.
That was still the case in 2018 – deliveries grew by 4.4% year on year and profit margins were 8%, more than double that of Volkswagen.
But, for everyone including Skoda, it was a tricky year too and there’s more to come.
CEO Bernhard Maier highlighted during Skoda’s annual press conference today that there was a host challenging factors at play, many of which those in the car industry are well-versed in. He mentioned the US and China trade war, Brexit, fluctuating exchange rates and increasing personnel costs in the Czech Republic.
Skoda’s operating profit in 2018 was down 14.6% due to major investment, mostly related to electrification and digitisation, plus modernising its plants.
There’s also a new plant in the pipeline (there is now a shortlist of four), due to be running by the end of 2022, that will require massive investment.
Skoda’s electrification plans are also a little hazy, although of course driven by the broader VW Group’s push to go straight to electric.
An electric Citigo and plug-in Superb will launch this year, and two electric models based on the Vision iV will arrive before 2023.
This suggests that the remaining 20 models will be pure diesel or petrol. That’s surprising when many manufacturers are starting to introduce 48V mild-hybrid systems across the board to lower CO2. It’s of particular concern when you consider the incoming EU emissions targets, which require makers to have an average fleet CO2 output of 95g/km or lower by 2021.
Indeed, Maier told Autocar that based on the current product mix that customers are choosing (for example, buyers are largely favouring high-powered Kodiaqs), the brand will not be able to achieve those targets. And if those targets aren’t met, there will be heavy fines.
On the upside, Skoda’s recent product roll-out is well timed to counter bigger geopolitical issues. Scala and Kamiq go on sale this year, both of which should translate to huge volume for Skoda. Octavia remains its biggest seller and a new one launches this year that promises even greater things than the current model.
Nonetheless, Skoda must safeguard its long-term future in the next couple of years with shrewd decisions. That’s exactly what it’s attempting with mass investment now. As Maier put it: “Anyone not even thinking about next week may not be here tomorrow.”
Source: Autocar Online