As Skoda readies its ursine SUV contender, we ask can it adapt to the North American landscape?
News that VW Group senior management are seriously evaluating Skoda’s entry into the North American car market is significant yet unsurprising. In many ways, it’s difficult to understand why it hasn’t happened before. After all, the US market tends to favour no nonsense cars and US success would raise Skoda’s and therefore VW Group revenues. And heaven knows, they need all the help they can get right now.
A number of factors have conjoined to make this an apt moment to migrate the Atlantic. Firstly, VW’s US woes predate NOx-gate by some margin. VW’s push into the US stalled, owing to a lacklustre offering in the big-selling medium sedan sector – (the US-only Passat model being ill-regarded by press and public) – and a lack of suitable SUV/crossover offerings. Quality and durability also fell short of expectations – another function of the ‘decontenting’ deemed necessary to allow VW to compete on price.
Secondly, a year on from VW’s admission of emissions defeat, the German car giant is little closer to a solution, much less an exit to the reputational mess they find themselves in – particularly in the World’s second largest car market. It’s likely to take brand Volkswagen a generation to put this mess behind it – and even then its only chance of succeeding is a root and branch reinvention of the brand, its values and its positioning.
A third factor in Skoda’s favour is that for the first time since its highly successful rebooting under VW’s loving embrace the Czech marque offers a full range of cars and is now about to launch a commercially significant large SUV in the forthcoming Kodiaq model. Previously, Skoda’s US offer would have been at best, patchy. No longer.
On this basis, surely VW should be pushing the Czech Republic’s finest for all they’re worth? Well, not so fast Matthias. Earlier this week, Automotive News reported Skoda management are still evaluating the potential of a move Stateside and will make a decision late next year. Why wait? Well, Skoda is virtually unknown in the US so before making such a huge commitment it’s probably prudent for them to carry out some robust market intelligence. Additionally, to comply with US regulations, all relevant Skoda models will require engineering changes which could require lead-times that run into years rather than months. With diesel propulsion off the menu, an appropriate range of power units will be required, which again require engineering time to attain market compatibility.
From a supply, distribution and sales perspective, things look slightly easier. VW’s US dealers have had a torrid time over the past twelve months as inventory has piled up, cars have become unsaleable, costs have spiralled and profits have been slashed. Last month, VW agreed a $1.2bn compensation package aimed at rebuilding relationships with their embattled US dealers, many of whom have invested $millions in their franchises, only to face ruin. According to recent press reports, this settlement brings the total compensation paid by VW in the US since the emissions scandal broke to a staggering $16.5bn. And they’re not out of the woods yet – in fact it’s increasingly likely VW will be tied up in expensive litigation for some considerable time.
Surely then it’s possible an untainted Skoda offering well engineered, attractively designed cars with a value proposition could offer American dealers with a lifeline – especially since the core VW brand itself seems likely to remain toxic for years to come. But while Skoda has been ‘simply clever’ enough to make the economics work elsewhere, it isn’t written in stone they can pull it off in the US. Another barrier is the cost of promoting Skoda to a nation for whom the Czech Republic, despite a noble heritage in this arena isn’t exactly synonymous with the motor car. There’s no guarantee that Skoda would be an easy sell, especially against opposition like Toyota, Hyundai and the domestic marques.
But what this proves for Skoda is that it has finally come of age as a respectable marque and frankly, wouldn’t it be ironic if this once laughing stock ended up saving the parent company’s bacon? Success in the US could give VW sufficient breathing space to put clear water between pre-scandal Volkswagen and the new, cuddlier, alternative propulsion brand Matthias Muller and his cohorts hope will steer them out of the quicksand.
Will it happen? Probably. Should it happen? Well, it’s as good an idea as there seems to be in Wolfsburg’s corridors of power right now. When will it happen? I’d give it about eighteen months – about enough time for the new US-friendly Kodiaq model to gain sales and production momentum.