Skoda may exit China to help VW

Skoda may exit China amid intense competition from local brands in the world’s biggest market.

“We will look together with our Chinese joint venture partner at how we want to continue there,” Skoda CEO Klaus Zellmer told Automotive News Europe sister publication Automobilwoche.

Skoda’s withdrawal from China would allow parent Volkswagen Group to concentrate efforts in the country on its main VW brand, which is struggling in the face of domestic competition.

Instead of completely pulling out of China, Skoda could also consider only selling imported cars. Skoda’s Chinese models are cuurently built in VW Group joint venture factories. “If we want to focus our efforts, it’s worth looking at the scenarios and then deciding,” Zellmer said.

Chinese automakers, many of them state-owned, long operated in the shadow of international companies such as General Motorrs, Volkswagen and Mercedes-Benz, even when partenered through joint ventures.

But Beijing’s efforts to lead in electric-vehicle technology has allowed many longtime companies, notably BYD and Geely Auto, to emerge as leaders as the EV era unfolds. Chinese EV startups such as Nio, Xpeng and Li Auto are also gaining traction and scale, threatening smaller foreigns brands.   

Skoda had 0.6 percent of the China market in 2021. The brand’s Chinese deliveries fell 31 percent to 36,300 in the first three quarters, according to its financial report. Global deliveries at Skoda fell 22 percent to 544,500 during the same period.

Leaving China would help the brand to focus more on India, for which it has responsibility within the VW Group.

Skoda also said in October that it plans to start selling and building cars in Vietnam, where it says there is “considerable growth potential.”

The brand sees annual sales potential of up to 40,000 vehicles in Vietnam, including cars built from completely knocked down kits at a local factory due to open in 2024.

Skoda is also responsible for VW Group’s Russian business, which came to a standstill after Russia’s invastion of Ukraine.

VW Group said in a statement to Reuters that it was normal business procedure for Skoda to continuously monitor its positioning in international markets and adapt to local developments.

“There have been no decisions so far on possible modifications in our strategy,” the company said.

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