Skoda's CEO Winfried Vahland announced the Czech company will become a more upmarket brand.

Skoda's CEO Winfried Vahland announced the Czech company will become a more upmarket brand.

Call us baffled but we don't seem to understand what is going on in Volkswagen's mind these days as the automotive giant has decided to make Skoda more premium. The Czech marque was supposed to be Volkswagen's budget brand but over the years the strategy has slowly but surely changed, with more upscale and expensive models.

Skoda has been one of Volkswagen's most successful sub brands in Europe even though last year sales went down by two percent to 921,000 units. Skoda CEO Winfried Vahland said this week in Geneva future models are going to target "more affluent buyers." In other words, expect prices to go up even further which will narrow the gap (not unless VW prices will go up as well) between the Volkswagen-badged models and the Skodas which use the same platform.

The only logical explanation we can find has to do with Volkswagen's plans for a true entry-level brand to tackle the likes of Dacia so they need to make room for such a sub-brand. However, a recent report says VW is "struggling" to keep costs down without compromising quality and safety and as a consequence the sub-brand's launch has been delayed.

In related news, Volkswagen has decided to refocus Seat on the European market after failing in China. We don't remember when Seat was profitable and even though sales went up last year by 11 percent to 355,000 units, the Spanish company still lost money due to an unexploited production capacity. Seat CEO Juergen Stackmann said at the Swiss show the company amassed 1.5 billon EUR losses since 2005.

Volkswagen plans on taking Skoda upmarket