Volkswagen Wants Skoda To Be Less Competitive

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Volkswagen likely to force Skoda to shift part of its production into Germany and pay more for shared technology

Volkswagen is attempting to make Skoda less competitive. As Skoda is achieving more profitability and much more positive response from the enthusiasts and buyers compared to Volkswagen in the post Dieselgate period, the German automobile group is trying to bring the Czech brand down.

In an attempt to do so, Volkswagen is expected to force Skoda to shift part of its production into Germany and pay higher royalty for the shared technologies as well. Volkswagen believes that Skoda is enjoying unfair advantage, considering the fact that the latter is capable of using VW’s superior technology and cheaper labour in its home country. Now, with a part of the Skoda production likely to be moved to Germany, Skoda will see its production cost increasing as labour cost in Germany is higher than in Czech Republic.

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Also, paying more to Volkswagen for the shared technologies will significantly bring down the profitability for Skoda. So far, it appears that Volkswagen aims to stay as the top band of the group at any cost, even if it means affecting business of another brand of the same group.

In recent times, Skoda has been doing great with fresh premium products and new technology. It has become one of the most successful mid-market car manufacturers in recent times and even surpassed Audi’s operating profit margin in 2016. With the cars like Kodiaq and Karoq the brand is expected to see more success. But, as it seems, Volkswagen is not taking Skoda’s success merrily.

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Volkswagen has been suffering from job cuts, huge amount of fine and several lawsuits across the world due to the Dieselgate scam. With its strategy to bring down Skoda and the futuristic plan to roll out a range of electric cars by 2025, VW will reaffirm its top position among the brands under Volkswagen AG ownership.

Source: Reuters