Skoda surge no problem for Volkswagen

The continuing rise of Czech value brand Skoda is reported to be a source of friction in Volkswagen, with Group CEO Matthias Mueller suggesting last month it would have to be reined in.

But the suggestion to put more distance between the cars and SUVs from Skoda and Volkswagen hasn’t delivered an expected ally.

Volkswagen brand boss Dr Herbert Diess would prefer that the rising Skoda was allowed to keep going its own way.

“There is always a discussion about these things, no? I’m fine with it. I’m absolutely fine,” Dr Diess said.

And Dr Diess is “absolutely fine” because Skoda makes more money for the Group per car than Volkswagen does, partly because its development costs are slashed by using the engineering already amortised by the Volkswagen brand.

“From the German perspective, we are losing some customers to Skoda, but for the Group that’s fine, because for the same customers, they get a much higher margin.

“They get a 10 per cent margin, we have a three per cent margin. So for the Group, substitution to Skoda is healthy and we can live with it,” he explained.

“It doesn’t matter. We have increased our profit. It changes the ratios a little bit, but we doubled the profits in the first half and continue those trends, so I’m happy with the performance of Volkswagen.”

One example of the added impetus Skoda’s surge gives the Group is in the European mid-size sedan market, where the Passat swaggers along with 33.2 per cent of the sales.

The Superb is second on 15.5 per cent, giving the Volkswagen Group an unassailable 48.7 per cent domination.

Like Volkswagen’s Spanish offshoot Seat, Skoda uses Volkswagen architecture for its cars, with the Kodiaq and upcoming Karoq essentially re-skinned Volkswagen Tiguans and the Octavia a rebodied Golf.

But while Volkswagen is pushing hard in China, where it sells about eight times as many cars as it does in its home market of Germany, and in the US, Skoda is not yet a world brand.

“You know, Skoda for us is a local thing in Europe. We don’t see them in the rest of the world, basically,” Dr Diess said.

“It’s Germany, a bit of Eastern Europe where we meet and the rest we don’t see each other.”