+420220580154The Czech Republic is still renowned for its well-developed industry and there is a much knowledge there related to heavy machinery production, metal working and a high level of professional mechanical abilities. The level of Czech products is no lower than that of German ones. Nevertheless, prices in the Czech Republic are more attractive because of the low exchange rate and manpower costs that are much cheaper than in Germany. An excellent example of the level and ability of Czech industry is the story of ŠKODA.
The history of ŠKODA AUTO is the history of a company fully dedicated to continual improvement, creative innovation and work. These qualities were essential for ŠKODA AUTO to develop from a small, regional factory into one of the major car manufacturers in the world.
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THE HISTORY OF ŠKODA
The company began as a small firm founded in 1895 by Mr. Laurin and Mr. Klement in Mladá Boleslav. It originally produced bicycles, however, due to continuous successes, it was decided that the company, at the time called Slavia, would enter the motorbike business. This was to be the first of many successful and innovative steps taken by the company´s management and by the end of 1899, 200 motorbikes were exported to Germany and England. Furthermore, as a consequence of an unprecedented boom in vehicle production, the company took a risk and also entered the car market. The first model became an instant hit, both on the domestic and the international scenes.
After the end of the First World War, Laurin & Klement was in need of restructuring, therefore they searched for a partner and in 1925 merged with Pilsen’s Škoda works, an important manufacturer of military, logistic and industrial machinery. As a consequence of this merger, the company’s name was changed to ŠKODA. This union turned out to be very successful because, despite economic difficulties, the company was able to install its first assembly line, launch a new set of models and further increase the number of exported vehicles.
During the German occupation, car production stopped and instead of cars, the company produced war machinery. Car production was restored with the end of the Second World War. The company was nationalized and a state-planned economy was implemented. Even though initially the company’s production and exports increased (for example in 1973 the total exports surpassed domestic consumption and more than 70% of production was exported), ŠKODA didn´t develop sufficiently. Due to the impossibility of exporting to Western markets, it soon became obvious, that there was a technological gap between ŠKODA and Western car manufacturers. On the other hand, it has to be said that vehicles manufactured by ŠKODA at this period weren’t particularly bad. Within the Eastern sphere of influence, the ŠKODA brand was top and the last model manufactured under the Communist regime – Favorit – was, in spite of the technological gap, comparable to its Western counterparts.
ŠKODA’S PURCHASE BY VOLKSWAGEN
After the fall of the Iron Curtain and the arrival of capitalism, it soon became clear that in order to remain competitive the “national treasure” ŠKODA must be privatized. The privatization process was essential for the company’s existence, because many companies which had experienced “Czech privatization” ceased to exist or faced various problems. The ŠKODA management negotiated with two principal bidders: the French company Renault and the German concern Volkswagen. To put it differently, it was clash of two management concepts – the German sense of precision and French reliability. After thorough examination of both bids, it was decided that the German concern would acquire the company. One of the major reasons stated was the Volkswagen’s promise, that ŠKODA would remain within the concern as an independent brand with its own portfolio of models. As a consequence of this acquisition, ŠKODA changed its name to its current one: ŠKODA AUTO a.s.
WHAT ARE THE ADVANTAGES OF ŠKODA–VOLKSWAGEN COOPERATION?
What were the advantages of ŠKODA–Volkswagen cooperation? From today’s point of view it is clear that Volkswagen fulfilled its promises and provided ŠKODA with the know-how and capital to manufacture quality vehicles. However, Volkswagen’s most important contribution to ŠKODA was the backing of a strong brand. Thanks to Volkswagen’s existing distribution and marketing channels, ŠKODA was able to enter new markets and reach new customers in a more efficient way. The combination of German precision and Czech innovativeness and creativity led to astonishing results – within the segment of mid- and economy-level cars, the ŠKODA cars regularly score high marks and win both specialized and user tests.
Speaking in numbers – ŠKODA is the third biggest car manufacturer in the world, exporting 89% of its production to 104 countries of the world (in absolute numbers, this is over 830,000 cars per year). Almost three quarters of all cars manufactured are the Octavia and Fabia family cars (650,000 of car production). In the future, the Rapid and Citigo models are expected to have significant success. Today, these two models represent approximately 8% of all cars sold.
Speaking of global sales, the ŠKODA company focuses on the European and Asian markets, which account for more than 80% of its total income. In the future, it is expected that the company will try to strengthen its position in key markets such as China, India and Russia, as well as entering the new potential markets of Latin America and the Middle East.
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