It would seem Skoda is too good for its own good.
Considered by some people as secretly VW’s best brand, Skoda uses just about the same technologies as its more expensive members of the VAG family for cars that are usually bigger than the equivalent VWs or SEATs. While the interior quality of the firm’s best-selling Octavia can’t match the Golf’s, many people don’t care about soft-touch plastics and fancy materials. They want a big compact car at a fair price with a massive trunk, which the Octavia delivers.
It’s the same story with just about all Skodas, including the flagship Superb, essentially a larger Passat easier on the wallet. There’s also the matter of reliability as in many rankings, Skoda paradoxically comes out ahead of VW despite being the lesser brand. Many reviewers are also saying something along the lines of: Why buy a Golf when you can save money by getting the roomier and nearly-as-good Octavia? As such, cannibalization is also an issue since Skodas are eating into the sales of the more expensive VWs.
Skoda takes advantage of the lower costs with labor to sell cheaper, yet still considerably profitable cars, which has allowed the Czech brand to more than double its operating profit in the last three years to $1.4 billion (€1.2B) in 2016. With a profit margin of 8.7 percent, only the high-end Porsche is able to top that within the group.
Things could change in the future as Volkswagen is allegedly brewing a plan to force moneymaker Skoda to pay higher royalties in order to have access to the group’s goodies. A relevant example would have to be the MQB platform, which has already underpinned the aforementioned Octavia and Superb, as well as the Karoq and Kodiaq pair of SUVs.
In addition, some of Skoda’s production could be moved to factories in Germany where there is capacity for a higher output as a result of declining Passat and Golf production. Such a decision would also be taken as a way to avoid having to axe jobs at those assembly plants that are not running at full potential.
These measures are expected to be taken in order to eliminate what the reports describes as being Skoda’s “unfair advantages” and allow the VW core brand to consolidate its position as the leader. VW still outsells Skoda worldwide, but the manufacturer from Mladá Boleslav has blossomed in recent years to narrow the gap.
It will be interesting to see whether VW will bite the hand that feeds it, but that’s what happens sometime in the cruel business world. The folks from Wolfsburg want to make sure Skoda knows its place in the VAG empire - basically at the bottom of the food chain.