Skoda Considering Exit From China Due to Strong Competition

Skoda is currently evaluating to make a complete exit from China, the biggest car market in the world due to severely strong competition. Such a move would help Volkswagen Group boost the core VW brand’s presence in China, and allow Skoda to focus on other, more profitable markets.

The Czech automaker has suffered from a sharp sales decline in China, which once was its largest market accounting for more than 30% of Skoda’s global sales. This figure dropped to 13% in 2021 and is expected to drop even further in 2022. In the first three quarters of the year, Skoda sales recorded a 31% drop in China and 22% globally.

As reported by Automobilwoche, Klaus Zellmer, Skoda’s CEO, said:

“We will look together with our Chinese joint venture partner at how we want to continue there”.

Skoda currently has several China-specific models in its range including “GT” branded variants of the Kodiaq and the Kamiq, plus a long-wheelbase version of Octavia, called as the Octavia Pro. All of them are produced in VW Group’s joint venture plants in China.

Related: Skoda Willing to Launch Cars in Pakistan

If Skoda decides in favor of leaving or downplaying its presence in the Chinese market, funds could be redirected to other areas of the world. The automaker is responsible for VW Group’s operations in the growing market of India, while it is also planning on expanding to Vietnam. According to Skoda, the Vietnamese market has a potential of up to 40,000 annual sales, which is why it is actively looking into opening a new factory where cars could be assembled from knocked-down kits starting in 2024.

The long wheelbase Skoda Octavia Pro in China

Such moves could ease up the financial hurdles following VW Group’s exit from Russia, where Skoda was also responsible for its local operations. Speaking about the matter, Zellmer said:

“The consolidation of Volkswagen Group Russia within our financial results naturally poses a particular challenge for Skoda, with a negative effect on the operating result for the year in the mid-triple-digit millions.”

Skoda is not the only automaker that is having a hard time facing fierce competition from domestic automakers in China. Recently, the GAC-FCA joint venture that used to build Jeep models in China filed for bankruptcy. Also, Tesla and Mercedes-Benz have been forced to massively cut the prices of their EVs in China in order to be more competitive with Chinese automakers.

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