VW's Skoda to ponder U.S. production amid market push

September 29, 2016 7:40 PM EDT

A Skoda logo on a steering wheel is seen at the Mondial de l'Automobile, Paris auto show, during media day in Paris, France, September 29, 2016. REUTERS/Jacky Naegelen


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By Andreas Cremer

PARIS (Reuters) - Volkswagen's Czech division Skoda said it will assess the possibility of building cars in the United States as it considers selling in the world's second largest auto market where its parent continues to grapple with an emissions scandal.

Skoda, Volkswagen's (VW) mass-market brand, will start deliveries in Iran, South Korea and Singapore next year and will take time until the end of 2017 or later to decide whether to enter the United States, Skoda's chief executive, Bernhard Maier, said.

"Based on today's knowledge, a corresponding localization will be necessary to achieve a positive business case," Maier said in an interview at the Paris auto show on Thursday.

"A large number of factors" including analyses of market conditions and rivals, product outlook and sales operations will determine the final decision, he said.

"Ultimately, the business case has to be positive" to approve a U.S. market entry, he said.

The move reflects VW's growing optimism that a series of new products and a campaign to enhance its image will repair the damage done in the United States since its rigging of emissions tests broke over a year ago.

Though Skoda has been assessing the potential of the U.S. market for several months, it is in no rush to decide as it is tied up with an expansion course designed to curb dependence on volatile core markets and secure future growth.

"We really have our work cut out," said Maier, citing plans to add more sport-utility vehicles after unveiling the seven-seat Kodiaq SUV in Paris as well as advancing zero-emission technology and connected services.

Skoda will start importing fully built cars to Iran sometime next year and has signed preliminary accords with local partners to prepare partial CKD production in the country, the CEO said.

Taxation of cars with engine sizes below 1.6 liters which are common in Skoda's model range are particularly favorable, said Maier, who estimates that over 2 million cars will be sold per year in Iran following the country's nuclear deal with the West to end sanctions.

Separately, Skoda eyes record auto sales and profit this year, thanks to the first full year of deliveries of its Superb flagship model and stronger-than-expected demand for all model lines, Maier said.

Skoda has a five-digit number of pre-orders for the Kodiaq and aims to double its Chinese sales to about 600,000 cars by 2020-21 from over 300,000 this year due to SUV deliveries, he said.

(Reporting by Andreas Cremer; Editing by Leslie Adler)



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