The Shanghai Volkswagen Automobile Co. is enjoying the warmth of the new light brought by its newly launched Czech brand Skoda. The venture is an effort to bolster the sales of the automaker amid tight auto competition in the world's second biggest auto market.
The 50-50 joint venture of SAIC Motor Corp and Volkswagen AG, as reported by China Daily, expects Skoda, wholly owned by the German carmaker, to grab 2.5 to 3 percent of China's passenger car market by 2010.
Analysts in the industry said that the venture was a bold decision for the automaker - a new entrant in China. Shanghai Volkswagen said that it aims to sell over 30,000 Skoda Octavia compact sedans, the company's first China-made model, this year as part of its effort to push a total of more than 400,000 cars, up from 352,000 units in 2006.
Analysts say that the reflects a profitable year. The venture's first-half sales increased by 23.1 percent to 213,735 units, including 3,000 Octavias, ranking it as the top three passenger car manufacturer in China after VW's other tie-up with FAW Corp and General Motors' venture with SAIC.
Passenger car sales in China, which include sedans, sport utility vehicles and multi-purpose vehicles, will increase to 7.2 million units in 2010 from five million expected to be sold this year, predicted Yale Zhang, the director of Greater China Vehicle Forecasts for US consultancy CSM Worldwide Corp.
Shanghai Volkswagen said "the introduction of Skoda is the start of our multi-brand strategy and will expand our lineup to satisfy growing customer demand". The venture, which makes VW's Santana, Polo, Gol, Passat, and Touran, intends to launch a new Skoda model annually in coming years, including the subcompact Fabia and mid-range Superb, reported the Daily.
In an attempt to dismiss worries that Skoda will cannibalize VW brand sales in China, the company noted that Skoda product lines would not go head-to-head with Volkswagen models as the Czech marque has its own market position.
Skoda targets buyers who are "intelligent, steady-going and have a taste for life and inner-strength", such as the lawyers, doctors, teachers and senior civil servants, the company said. It will have 110 Skoda dealerships at the end of this year, up from 80 now, the company added.
Winfried Vahland, the CEO of the Volkswagen Group China, said last September that he expected Skoda to be a new "pillar" along with the Volkswagen and Audi brands to cement the German group's leadership in China's car market.
Industry data reflects that the company's sales in China increased by 24.6 percent to 431,369 cars from January to June this year. Overall sales of China-made passenger cars account for 2.55 million units in the same period, up 26 percent.
"Volkswagen is trying to boost sales in China's market, with more models tailor-made for Chinese customers," said Huang Zherui, an analyst at CSM Asia, which advises car makers in China. "The China market still has much more potential."
The company plans to maintain about 17-18 per cent share in the long term, said VW China Group executive vice-president Soh Weiming. "The market is still growing at a very aggressive pace," he added. "Ten years ago only a fortune teller could tell you how good the car market would be in the following year, but now the market is pretty stable."
Separately, VW and its car venture in Shanghai will jointly develop a new car targeting the North America and China market, the venture said on Wednesday. Reuters reported a tie-up with SACI Motor will develop a new sedan which would become a follow-up model of the locally produced Passat Lingyu.
