Thread: Skoda shifts gears to foreign expansion

MLADA BOLESLAV, Czech Republic (Reuters) - Skoda Auto plans to increase production by nearly half by 2010, with most of that growth coming from newly set-up foreign operations, Chief Executive Detlef Wittig said on Monday.

The largest Czech company, Skoda has long been Volkswagen AG's east European trump card, but the company is now staking its future on expansion in fast-growing markets even further east.
"One of the major changes will ... be that we will become a foreign manufacturer with a heavy weighting in emerging markets such as China, India and Russia, because the major growth will come from these markets," Witting told Reuters in an interview.

He said Skoda, which had 2006 sales of 7.1 billion euros and now sells mostly in western Europe, would lift production to 616,000 cars this year from last year's 556,347, building on a 15 percent rise in unit sales so far this year.
"I can see the growth rate for the next three, four, five years to continue. Maybe not at as fast a pace (as in recent years), but I can imagine we can expect a (growth) rate of somewhere between 5 and 10 percent," he said.
"At around 2010, we may be able to reach 800,000."

Most of the growth will come in emerging markets, where Skoda sees high potential and can limit costs thanks to cheap labour and avoidance of import tariffs.

Wittig said Skoda was looking to make 30,000 cars in China this year, the first year of operations, and was eventually targeting 100,000 units there.
It also aims to make 50,000 to 60,000 cars annually in Russia by around the end of this decade and eventually raise output in India to 40,000 to 50,000 from 20,000 this year.

He said Skoda would invest between 300 million and 400 million euros annually in the coming years, building upon the 3.9 billion euros invested in the company since VW took over in 1991 and turned Skoda from a Communist-era laggard into the biggest success story of Czech post-communist transformation.

Wittig said Skoda was looking to expand its current product line of four models -- the small Fabia and Roomster, the mid-sized Octavia and the Superb limousine.

It should be "something that fits demand in emerging markets, something below the Fabia range," Wittig said.

Wittig reiterated the company's dissatisfaction with the strength of the Czech crown, which has dented profits of the country's biggest exporter.
The currency climbed to record highs against the euro last December but has lost 4.2 percent so far this year as investors have taken advantage of low Czech interest rates to fund positions elsewhere.

By Martin Dokoupil

Source: Reuters India

Doesn't look to bad for Skoda then.