VW’s Skoda Sees New Cars Countering Europe Drop for Gains

Volkswagen AG (VOW)’s Czech brand Skoda said it’s “fundamentally” confident that 2013 deliveries will rise as the introduction of a new Octavia small car version and Spaceback hatchback more than offsets a drop in European demand.

The first quarter and probably the entire first half will be “somewhat” weaker than a year earlier because of the contraction in Skoda Auto’s main European markets and the transition to the new Octavia, Chief Executive Officer Winfried Vahland said today at a press conference in the division’s home city of Mlada Boleslav. The next quarter looks “better” than the current one, and growth should continue to enable full production capacity, he said.

“As soon as the full volumes of the Octavia and the Spaceback will be available, the tide should continue to turn,” Vahland said.

Industrywide European car registrations dropped 10 percent from a year earlier to 829,359 vehicles in February, dragging the two-month figure down 9.3 percent to 1.75 million autos, the Brussels-based European Automobile Manufacturers’ Association, or ACEA, said yesterday. Wolfsburg, Germany-based Volkswagen, the region’s biggest carmaker, is among vehicle manufacturers predicting that annual earnings won’t rise as the market shrinks a sixth consecutive year.

Skoda, which Volkswagen acquired shortly after the fall of communism in the then-Czechoslovakia in 1989, is “on course” to fulfill its 2018 growth target to at least 1.5 million annual deliveries, Vahland said. That compares with 939,200 cars and sport-utility vehicles sold in 2012, a gain of 6.8 percent.

Eight Vehicles

Eight new or refurbished models will come out this year and Skoda will completely revamp its line-up by 2015, Vahland reiterated today. The division also plans to add an SUV in coming years that’s bigger than its current Yeti model, he said. The Octavia entered showrooms in November, and the Spaceback is scheduled to go on sale by the fourth quarter.

The roll-outs are the “right recipe” against shrinking European demand, the CEO said.

The division’s strategy is part of VW’s plan to overtake Toyota Motor Corp. (7203) and General Motors Co. (GM) as the world’s biggest carmaker by 2018.

Russia, China and western Europe should be the biggest markets for the new SUV, Vahland said. Skoda hasn’t decided yet on a production site for the model, he said. In addition to the brand’s plants in the Czech Republic, Skoda also produces cars in Russia, India and China, including at factories in partnership with Volkswagen.

Skoda’s operating profit fell 4.2 percent to 712 million euros ($916 million) last year. Revenue rose 1.7 percent to 10.4 billion euros. Its global sales in February declined 6.9 percent to 67,100 vehicles, the division said on March 14. The brand’s European car sales dropped 12 percent last month, according to the ACEA.

To contact the reporter on this story: Lenka Ponikelska in Mlada Boleslav via lponikelska1@bloomberg.net

To contact the editor responsible for this story: James M. Gomez at jagomez@bloomberg.net

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