The Czech Republic as we know it today has only been in existence since 1993, following a variable 75 year period after the end of World War I, when on 28 October 1918, the Czech and Slovak people established Czechoslovakia and declared independence from the crumbling Austro-Hungarian empire. The new country did not survive the pressures of its varying ethnic makeup and in 1939, Nazi occupation again divided the country into Czech and Slovak States. A smaller re-united Czechoslovakia fell under Soviet influence after 1945, starving the once mighty Skoda manufacturing concern of funds to develop its various interests.

In little more than 20 years, unrest built into the movement that became known as the Prague Spring of 1968, under the reformist Alexander Dubček who was elected First Secretary of the Communist Party of Czechoslovakia in that year. The Soviets eventually suppressed the movement. Although the reforms of the Prague Spring were reversed, Czechoslovakia was one of the first former Soviet states to emerge from communist rule 21 years later, after the non-violent Velvet Revolution of 1989.

The Velvet Revolution

The country again split into twoduring the Velvet Revolution, with the Czech Republic and Slovakia established in 1993, pursuing a course of economic liberalisation. The Czech Republic today is a comparatively small, central European, land-locked buffer state bordering Germany, Poland, Slovakia and Austria.

The country is one of the smaller European nations with a population of around 10.6 million. Most are in the 25–54 age range. A population growth rate of approximately 0.16% means that the population is ageing, with a smaller number of younger people to support this middle-aged population as it grows older. The Czech Republic has a highly urbanised population, with the capital city Prague home to a population of around 1.3 million.

The Czech Republic joined the European Union in 2004 and was inevitably affected by the 2008 financial crisis. The CIA reports that the country fell into recession, like many other European countries at the time, with slow recovery through 2009 and weak growth in 2010 and 2011. A combination of the continuing financial crisis in the EU and Government austerity measures saw the Czech economy slip back into recession again in 2012 and 2013. Weak growth returned in 2014.

Skoda's Beginnings

Skoda was originally founded as Laurin and Klement early in automotive history in 1895. The company was established some years after another Czech motor manufacturer Tatra, which also continues to this day. Tatra was best known as a maker of advanced streamlined cars in the 1930s and providing the design that formed the basis of the Volkswagen Beetle. The company has been focussed on truck production since 1999, specialising in heavy vehicles with off-road capability.

Today, the automotive industry is the largest single industry in the country according to the CIA, responsible for 24% of all Czech manufacturing. Car production exceeded 1 million in 2010 for the first time and over 80% of that production was exported.

Skoda remains the backbone of the Czech automotive industry. After the Velvet Revolution, the company had begun to modernise its model range with the launch of the Favorit to replace the ageing rear-engined models. In 1991, the Volkswagen Group was chosen by the Czech Government as a foreign partner for the company and assumed a 30% stake. This stake was progressively increased through the 1990s and the Volkswagen Group took complete control in 2000.

Volkswagen has positioned Skoda as a less prestigious brand than Volkswagen and as a more conservative alternative to its Spanish subsidiary SEAT. Production takes place at three production sites in the Czech Republic at Mladá Boleslav, Kvasiny and Vrchlabí. The company head office is at Mladá Boleslav some 60km north-east of Prague. Like all Volkswagen Group’s mass-market brands; Volkswagen, Skoda, SEAT and Audi, there is extensive powertrain and component sharing as well. The company has a global fleet department to handle fleet business.

In the first half of 2015, Skoda delivered 544,300 vehicles, an increase of 4.2% compared with H1 2014, according to the company. This has helped to boost sales revenues to €6,421m, an increase of 7.5% and operating profit to €522, a 22.8% increase over H1 2014.

Manufacturing industry

As well as Skoda, Hyundai also builds cars in the Czech Republic. Five models are produced at the Nošovice plant: i30 (3 and 5 door), ix20, i30 wagon and ix35. Production reached 166,830 cars in H1 2015, with 53% of production turned over to the ix35. The joint venture between PSA Peugeot Citroën and Toyota produces the Citroën C1, Peugeot 1008 and Toyota Aygo at Kolin. The plant produced 114,694 cars in H1 2015, 38% more than in H1 2014.

According to ACEA, total vehicle production in the Czech Republic in 2014 reached 1,162,017, making it the 5th largest vehicle producing State in the EU. Of the total, 1,157,371 were cars, 3,826 were light CVs and 820 were heavy commercial vehicles. The Czech Republic has the highest percentage of the population directly employed in automotive manufacturing of any EU member state at 2.7%. The industry employed 143,227 in 2012, according to ACEA data, a number that seems to have fallen. AIA data suggests that at the end of 2014, 112,877 people were employed in automotive manufacturing.

Rising vehicle sales

Between January and June 2015 (H1) total new passenger car registrations in the Czech Republic reached 113,261, a 20.4% increase over H1 2014. According to data from the Czech Automotive Industry Association (AIA), January to July 2015 new car registrations reached 134,676 and for the whole of 2014, the total was 192,314. According to LeasePlan, quoting data from the Czech Car Importers Association (SDA), Skoda was the best seller in 2014 with 58,091 registrations and a 30.2% market share, far ahead of second placed Hyundai with 18,934 registrations, keeping Hyundai just ahead of Volkswagen with 18,281 registrations. AIA data suggests that in total there are 4,893,562 cars on Czech roads with an average age of 14.5 years.

By comparison, the Czech light CV market is quite small, but LeasePlan comments that the segment grew in 2014 with the number of registered vehicles reaching the volume sold in 2011. The company suggests that in H1 2015 strong growth has continued. Registrations reached 9,316 and look set to exceed the 2014 total of 13,165. LeasePlan sees potential to reach 15,000 registrations.

LeasePlan estimates that in total the Czech business car and LCV sectors have 918,500 vehicles in use, 91% being passengers cars and 9% LCV. Among the factors influencing the sector are a large-scale renewal of fleets at some key state owned companies, including the Czech Post and Railways.

Business car market

Looking at 2014 registrations, of the 192,314 total volume of registered passenger cars, some 75% is of the business car market, reckons LeasePlan. The company says that registrations have been affected by an increase in registrations from SMEs and a shortening of the replacement cycle of cars in the segment. The business car segment is also influenced by Czech state owned companies and new short-term (12 months) leasing products. In total, the Czech economy expects growth of 4% after six years of both decline and stable development, reckons LeasePlan.

It is perhaps no surprise that Skoda’s strength in the Czech car market is also reflected in the business sector. LeasePlan’s fleet is 58% Skoda. Second placed Volkswagen has a 9% share and all others have single digit percentages. The Skoda Octavia is the business car favourite on the LeasePlan fleet, followed by three other Skoda models: Fabia (10%), Superb (7%) and Rapid (6%). LeasePlan reports that generally, C-segment models are the most popular among business users, with an almost equal share for B-segment models and SUVs. Station Wagons are the most popular body style, followed by hatchbacks.

Road tax for cars is based on engine size and LeasePlan reports that for an engine between 1,500cm3 and 2,000cm3, the annual cost is €111 (3,000 Czech Crowns) and for a light CV with 2 axles and a gross weight between 2.0 and 3.5-tonnes, the tax would be €133 (3,600 Czech Crowns). Certain vehicle categories are excluded from road tax, including electric and hybrid electric vehicles as well as those powered by compressed natural gas (CNG), liquefied petroleum gas (LPG) or ethanol.

LeasePlan suggests that finance leasing is a popular method of vehicle finance, but that this is mostly for retail customers. The data suggests that full service leasing is more popular though, particularly if combined with the operational leasing total. Relatively few vehicles are operated under fleet management only.