The renaissance of Škoda under Volkswagen Group is one of the most extraordinary auto industry stories of the past 20 years. The Czech manufacturer has travelled from downtrodden Communist brand to fast-growing, full-range automaker in remarkably quick time. This year, only a raft of model changeovers will see global production fall short of a million units – the milestone will unquestionably be reached in 2014.

And while Škoda’s foundations are built on retail sales, a growing emphasis on fleet business is one of the key drivers behind the company’s growth this year. Recently appointed UK fleet sales director Patrick McGillycuddy says the target is for Škoda to reach a 50:50 retail-to-fleet split, moving from its current 60% retail, 40% fleet mix.

Škoda’s 21st century expansion has seen the range expand to seven models, covering all mainstream sectors from city car to upper medium, together with compact MPV and SUV models. The emphasis is on affordability and practicality, which has helped Škoda’s appeal in tough economic times – though Škoda is these days far from being a ‘budget brand’ along the lines of former East European rival Dacia.

While Škoda leverages Volkswagen Group platforms and powertrains, the cars’ design and identity is kept very separate and has been allowed to develop on its own track. Škoda CEO, Winfried Vahland said: ‘Škoda is not a cheap Volkswagen. Our brand has become younger and more dynamic.’

Indeed, the brand’s image is not far from the position outlined by former VW chairman Dr Ferdinand Piech in the early 1990s, where he said Škoda’s key rivals were ‘Volvo, Rover and Saab.’

Škoda has outlined mid-term plans to boost global output, including operations in China and India, to 1.5 million cars by 2018. By then, Škoda targets selling 60% of its total production outside Europe. European markets currently account for 67% of Škoda Auto sales at present. A third of the total volume will be in China, where the Fabia, Octavia and Superb are already on sale and the Yeti is about to follow.

Škoda’s entire model range will have been renewed between 2012 and 2015, and a larger SUV model is expected to be added, but trims and segments will be kept simple. The basic brand strategy is to remain within its price point. Over-equipping cars with expensive technology would affect its position in the market, which is why Škoda’s eco-models are conventional diesel greenline versions, not electric or hybrid cars.

GLOBAL SALES

Škoda worldwide sales in October 2013 grew sharply by 7.5% to 83,000, setting a new October record for the brand and taking year-to-date sales to 768,700 in the first ten months. In Europe, Škoda saw double-digit growth of 13.7 % to 55,700 units, with a particularly strong performance in Germany, the brand’s largest European market.

Cumulative global January-October sales of 768,700 vehicles worldwide represent a slight decline of 3.3% on 2012, where sales in the corresponding period reached 795,100. But Škoda puts this down to the effect of three major model launches in the first half of 2013, including the run-out and ramp-up of the Octavia sedan, the biggest-selling model in the Škoda range.

‘With an increase of 7.5% in October, we have firmly confirmed the positive trend of recent months,’ said Werner Eichhorn, Škoda board member for sales and marketing. ‘The global growth once again demonstrates the power of the brand and the appeal of our young model range. The new and revised models have been exceptionally well received. The new Octavia has a very high customer acceptance and has exceeded our expectations.’

In Western Europe, sales of the new Octavia increased by 48.8% in October and in Central Europe by 23.1% compared to the same month in 2012. Škoda’s market share in Europe grew in the first 10 months of 2013 to more than 3.9%. The market launch for the new Octavia in China is set for next year.

New Octavia is bigger than its predecessor: it is 90mm longer, 50mm wider and has a 100mm longer wheelbase than the previous model. Despite this, the new car is 102kg lighter thanks to increased use of lightweight steels in the bodyshell.

The latest Škoda model to be launched is the Rapid Spaceback, a more conventional European-focused compact hatchback version of the three-box Rapid that was launched at the end of 2012. The Rapid Spaceback takes Škoda into the largest vehicle segment in Europe, and it is expected to contribute major growth in 2014 as Škoda targets full-year sales of 1 million units for the first time in its history.

Rapid Spaceback marks Škoda’s return to the compact hatchback class for the first time since the Felicia model of the 1990s, and it is expected to outsell the more conventional three-box Rapid in European markets by as much as two-to-one. It will compete with the Hyundai i30 and Kia cee’d, as well as mainstream models such as Ford Focus and Opel/Vauxhall Astra.

In the UK, for example, Škoda expects to sell around 8,000 Rapid Spaceback models against 4,000 Rapids in 2014. The UK is Škoda’s fourth-largest market after Germany, China and Russia, and is expected to account for 65,000 sales in 2013. By 2018, Škoda could be selling 100,000 cars in the UK, believes UK brand director Alasdair Stewart.

‘The Spaceback opens up a new sector for Škoda, a bit like when we introduced the Citigo,’ he said. ‘It will appeal to younger buyers and families, and will be more lifestyle-driven, so we will take a more digital approach to selling.’ Stewart said Škoda’s customer retention, at 30%, is the highest in the Volkswagen Group, but he is targeting an increase to 45%.

Meanwhile Škoda’s European dealer network has been spruced up, with a new corporate identity package based around the latest Škoda corporate ID, introduced in 2011. A number of fleet sales specialists – around 25 in the UK out of a network of 134 – have been appointed, and Škoda has beefed up its area management team in the UK, with eight managers handling key account sales, increased from three.

Pre-orders are already rolling in for the fundamentally revised Yeti SUV, which is due for launch in January 2014. The new Yeti will be available in two visually different versions – a standard two-wheel drive Yeti aimed at urban customers and a beefed-up 4×4 version called Yeti Outdoor.

In Western Europe, Škoda has outperformed the overall market. In the first ten months, the brand’s market share in Western Europe grew to 3.1% (3.0% in 2012), and recorded a significant increase of 17.3 % in October, with 32,400 units sold compared to 27,600 units a year earlier.

In Germany, Škoda’s second-largest market worldwide after China, Škoda is now the largest import brand; sales increased in October by 23.5% to over 12,100 units. Škoda also saw double-digit growth in several other markets, including the UK (5,700 vehicles, up 23.1%), Denmark (1,400, up 32.0%), Finland (830 vehicles, up 33.6%), Italy (900 vehicles, up 23.0%), the Netherlands (1,200 vehicles, up 21.3%), Norway (760 vehicles, up 25.8%) and- Spain (1,000 vehicles, up 56.6%). In Norway, Škoda achieved its best-ever monthly sales result.

Central European sales increased significantly above the market average by 21.6% in October to 12,000 vehicles (October 2012: 9,800). This meant Škoda’s market share increased to 20.5% in October. In the Czech home market, Škoda saw significant growth, against a market that declined slightly overall. Deliveries to customers in the Czech Republic reached 5,700 units (up from 5,300), an increase of 8.2 %. Škoda’s 10-month market share in the Czech Republic stands at 35.8%.

In Eastern Europe, Škoda delivered 11,400 vehicles to customers in October, a slight decrease of 1.7% on 2012’s 11,600. After ten months, Škoda’s market share in the region stood at around 3.9%. In Kazakhstan, the brand saw a three-fold increase in sales, selling more cars in one month than ever before, while the three Baltic States (Estonia, Latvia, Lithuania), saw combined sales of 700 units, up 66.6% on October 2012. In Romania, the brand grew by 24.1% with over 600 units and in Serbia by 16.2% with 400 vehicles.

However, in Russia, Škoda’s third largest market, sales fell 14.5% from 8,300 units in October 2012 to 7,100 vehicles.

China sales of 21,500 vehicles in October fell 6.0% against October 2012’s 22,900 units. Nevertheless, this was still the fourth-strongest sales month for Škoda since its entry on to the Chinese market six years ago. Cumulatively over the first ten months, Škoda sold 199,200 vehicles in China, down 2.7% on January-October 2012’s total of 204,800, partly due to a model change for the Superb and the fact that the new Octavia has yet to go on sale in China.

In India, deliveries increased by 16.1% to over 2,300 vehicles, boosted by the recent launch of the new Octavia on the Indian market.

GLOBAL FLEET SALES STRUCTURE

Fleet sales tend to be structured nationally, but Škoda does have frame agreements with some multinational customers, generally under the umbrella of the Volkswagen Group Fleet International (VGFI) business.

This highly successful business coordinates international key account sales of Volkswagen, Audi, SEAT and Škoda vehicles, and VW Group claims VGFI is market leader in the five largest individual EU markets – Germany, UK, France, Spain and Italy – in terms of key account business. According to analysts Dataforce, a total of 155,433 VW Group vehicles were registered in the fleet market in the “big 5” markets in the first quarter of 2012.

EUROPEAN PRODUCTION FACILITIES

Škoda is one of Europe’s oldest automakers – its roots lie in the Laurin & Klement cycle producer, established in 1895. The first motor vehicle left the Škoda factory at Mlada Boleslav in 1905, where the company’s head office and main production base remain to this day. Cumulative production since then has topped 15 million vehicles, more than 5m of which were produced in the past six years.

Two further production plants were established at Kvasiny and Vrchlabi in the Czech Republic (then still Czechoslovakia) prior to the Second World War, and these are both still part of Škoda’s European manufacturing base.

Škoda currently manufactures the Fabia, Rapid and Octavia models at the Mlada Boleslav plant, which employs around 20,000 people. The plant also supplies the Rapid-based Toledo model to VW sister-brand SEAT. The site also includes a major engine production hall, which supplies three-cylinder 1.2 MPI petrol engines and supercharged TSI petrol engines to Škoda and to other Volkswagen Group brands. Mlada Boleslav also produces MQ100 and MQ200 manual gearboxes, axles and other car components. The town is also home to the company headquarters, technical development, design and training facilities.

Earlier in 2013, Škoda added a new modern and environmentally friendly stamping line at Mlada Boleslav. Through energy recovery and storage, the servo press line is said to be up to 15% more efficient than older, comparable systems, while also being faster and more precise.

The Kvasiny plant first started production in the 1930s, initially for Jawa. Today it produces the company’s flagship Superb saloon and Superb Combi, the Yeti SUV and the Roomster compact MPV.

Since 2012, the Vrchlabi plant has been producing sophisticated DSG automatic transmissions for the whole VW Group. The seven-speed dual-clutch DQ200 transmission is one of the most innovative automatic transmissions in the industry. The plant has recently increased capacity to 1,500 units a day.

Škoda also sources cars from the Volkswagen Group multi-model assembly plant in Bratislava, the capital of neighbouring Slovakia, which started production in 1993. Currently this modern factory produces around 420,000 vehicles every year.

Octavia models were made there until 2010, but since 2011, Škoda has sourced the smallest car in its range, the Citigo, from Bratislava. Citigo is part of the New Small Family series, which also includes the technically identical Volkswagen Up! and SEAT Mii models. In 2012 more than 36,000 Citigos were produced in Bratislava.

RUSSIA & CISMARKETS

The Volkswagen Group assembly plant in the Russian city of Kaluga, south of Moscow, was officially opened in 2007. Cars were initially delivered as Semi-Knocked-Down (SKD) assembly kits. Full-scale production started in 2010 and now 150,000 units roll off the production line every year. Škoda Fabia and Octavia are produced in Kaluga alongside Volkswagen and Audi models.

A second production plant was opened in 2011. This is located at the GAZ plant in Nizhny Novgorod, and the Yeti has been assembled there since late 2011, again initially from SKD kits, but since the end of 2012 from Completely Knocked Down (CKD) kits.

In June 2013, Škoda added production of the redesigned Octavia at Nizhny Novgorod. Octavia is the brand’s best-selling car in Russia. ‘We are aiming for strong growth in Russia in the years ahead, and the start of production of the new Octavia is a very important step in this direction,’ said CEO Winfried Vahland. ‘Russia has become our third-most important sales market worldwide and our number two in Europe. The Octavia currently accounts for more than half of our sales in Russia.’

Škoda plans to produce 110,000 cars annually at Nizhny Novgorod and wants to boost its combined output at its two Russian factories to 350,000 cars annually in the short term from under 100,000 at present.

Škoda has also added assembly of the new Octavia to two SKD assembly ventures in Eastern Europe, in Ukraine and Kazakhstan. Octavia, assembled by local partner companies, is the automaker's most popular model in both countries.

In Ukraine, the Octavia, Fabia, Yeti, Superb and Roomster are assembled from SKD kits by Europcar in Solomonovo. In 2012, Škoda's Ukrainian sales rose about 32% to 14,400 vehicles and market share to 6.6% from 4.9%. Meanwhile in Kazakhstan, Octavia, Fabia, Yeti and Superb are assembled from SKD kits by Azia Avto in Ust-Kamenogorsk, north-east Kazakhstan. Škoda’s Kazakhstan sales rose 158% last year to 1,900 vehicles.

INDIA

Škoda has relaunched the Octavia in India, three years after it was discontinued. The latest model is positioned as much more of a premium model than the previous versions sold in India between 2001 and 2010, during which time sales of 45,000 units were achieved.

The new Octavia is being produced locally at the Aurangabad production plant in India’s Maharashtra region, alongside the Yeti, and Superb models. The Rapid is also sold in India, and it has been produced locally at Volkswagen’s plant in the city of Pune since the end of 2011. Škoda wants to improve aftersales service and widen its product line in India. The launch of a compact car model locally is also under consideration.

CHINA

Škoda marked six years of China production in July, and has recently produced its 1 millionth car in China. Indeed, China is now the biggest global market for the brand, accounting for close to one quarter of global sales. Škoda cars are produced in partnership with Shanghai Volkswagen, the longest-standing foreign JV in the country.

And Škoda is planning to expand its production capacity and sales presence in China as part of its 2018 growth strategy. Board member for sales and marketing, Werner Eichhorn said: ‘Škoda is still in an early stage of its development in China. Our next plans are to introduce more new models, enhance brand recognition and expand the sales and service network. We expect to double production in China in the next few years.’ That would take Škoda production in China to around 450,000 units.

The first Škoda to be produced in China was an Octavia model, and with well over half a million units produced in China, the Octavia is the most popular Škoda model on the market. Greenline and RS models have been available since 2010, and currently production is being switched to the new Octavia, which goes on sale in China early in 2014.

Octavia is one of three models that have built Škoda’s Chinese market presence. In 2008 it was joined by the small Fabia hatchback, alongside an off-road version called the Fabia Scout. And in 2009, the largest Škoda, the Superb, went on sale. With its long wheelbase and exceptional rear legroom, the Superb is ideal for the Chinese market, where many buyers prefer to be chauffeured. Indeed, the Superb is based on the long-wheelbase Volkswagen Passat platform, a model that is only made in China.

In 2011, Superb became the top seller in the Chinese upper-medium sector. China accounted for over 40% of the 116,800 Superbs sold worldwide that year, making it the biggest market for this model. The facelifted Superb went on sale in September 2013.

Also in 2013, Škoda introduced the new compact Rapid saloon and will introduce the Yeti SUV in early 2014. The dealer network is currently being increased from about 400 to more than 600 in the medium term.