China now biggest market for VW-owned Czech brand

Inspired by its strong performance over the past five years, Volkswagen Group's Czech unit Skoda aims to more than double its China sales over the next five years, Skoda Chairman Winfried Vahland said in an interview last week.

Vahland said the company expects to hike annual sales in China to 500,000 by 2016 from 220,000 units in 2011.

China, Skoda's biggest single market in the world, will then account for 40 percent of the brand's global sales, up from a quarter last year, Vahland said.

Skoda and Shanghai Volkswagen, a joint venture between Volkswagen and SAIC Motor, held a grand ceremony for the fifth anniversary of the Czech marque's official entry into the Chinese market.

Commemorative versions of the locally produced Skoda Fabia subcompact, Octavia compact and Superb mid-sized sedan were launched to mark the fifth anniversary last week.

The Octavia, the first Skoda model introduced in China, was first made at Shanghai Volkswagen in 2007, when its sales totaled to 27,000 units for the year.

"Skoda made the achievement over the past five years because our right product range fit perfectly with Chinese customer needs and due to our partnership with Shanghai Volkswagen," Vahland said.

He said Skoda will continue to invest to raise production capacity and introduce new models in China.

Critical market

"The Chinese market is critical to Skoda's 2018 strategy," he added.

The brand aims to boost global sales to 1.5 million cars by 2018 from 879,200 units last year.

Vahland said Skoda plans to produce the Yeti SUV and the Rapid sedan in China next year.

The Rapid, with a size between the Fabia and Octavia, is specially developed for the Chinese market.

He said he remains optimistic for the Chinese car market, although growth has slowed sharply this year.

He predicted that passenger vehicle sales in China will exceed 20 million units annually within eight to 10 years, up from 13 million units last year.

"I believe China's economy will remain robust and the auto industry is an important part of it," he added.

Zhang Hailiang, president of Shanghai Volkswagen, said Skoda's new products and rising production are important to the joint venture.

Skoda contributed one-fifth of Shanghai Volkswagen's 1.1 million units in sales last year, said Zhang.

In the first half of this year, Skoda sales in China climbed by 7.5 percent year-on-year to 106,325 units.

"We are plagued by a production capacity bottleneck. Otherwise, Skoda sales would be more than what it has been," he said.

The joint venture now has four operational plants in Shanghai and the neighboring city of Nanjing, which have a combined production capacity of more than a million units a year.

It is also building new factories in Jiangsu and Zhejiang provinces in the east and the Xinjiang Uygur autonomous region in the west.

In addition to Skoda cars, the joint venture produces a phalanx of Volkswagen models such as the Passat, Lavida, Polo, Touran and Santana.

Responding to a question about local government restrictions on private car purchases in Guangzhou, Zhang said "the restrictions in first-tier cities will not have a big impact on China's car market".

"We have huge growth potential in the second, third and fourth-tier cities," he added.

Last week, the Guangzhou city government announced a sudden decision to limit the number of new car license plates, with only 10,000 to be granted a month beginning in July in an attempt to ease traffic congestion.

The move came a year and a half after the Beijing municipal government implemented a similar policy.

Vahland said Skoda will begin importing cars into China in early 2013.

"It will test the Chinese market for future models to be locally produced. Our major focus is on local production," he said.

Contact the writer at gongzhengzheng@chinadaily.com.cn.