30 years of ŠKODA AUTO in the Volkswagen Group: A European economic success story
March 22, 2021
› ŠKODA AUTO’s entry into the Volkswagen Group – a milestone in Czech-German economic relations after 1989
› 30 years of ŠKODA AUTO’s dynamic development: vehicle deliveries increased more than six-fold, workforce grew from 17,000 to more than 42,000 worldwide, and billions invested in development, production and training
› NEXT LEVEL ŠKODA programme for the future: Further growth in the volume segment, conquering new markets and making further progress in sustainability and diversity
Mladá Boleslav, 22 March 2021 – For ŠKODA AUTO, 28 March marks the 30th anniversary of an important event: on this day in 1991, the union of the company ‘ŠKODA, automobilová akciová společnost’ and the Volkswagen Group was contractually sealed. Since then, the car manufacturer from Mladá Boleslav has developed from a regional market leader into a dynamically growing global player that is active in more than 100 markets worldwide. ŠKODA AUTO currently offers ten model series and delivered more than one million vehicles to customers last year for the seventh year in a row.
Thomas Schäfer, Chairman of the Board of Management of ŠKODA AUTO, emphasises: “The integration of ŠKODA AUTO into the Volkswagen Group is a great example of a successful transformation in the Czech Republic and the European Union as a whole. With determination, foresight and courage, the people involved at that time set the right course for ŠKODA AUTO’s impressive development. Today, the company accounts for 5% of the Czech Republic’s gross domestic product and 9% of exports. The brand is also a real asset in the Volkswagen Group and has taken on a number of responsibilities, for example, for the growth regions of India, Russia and North Africa as well as for developing the next generation of the ŠKODA SUPERB and Volkswagen Passat. With our NEXT LEVEL ŠKODA programme for the future, we are taking the next steps to lead the company successfully through the new decade. We are focusing on three priorities: Expanding our model portfolio towards entry-level segments, opening up new markets for further growth in the volume segment and engaging with diversity and sustainability in every aspect of our work.”
Innovative compact model FAVORIT attracts Volkswagen’s interest
The first contacts between ŠKODA and the Volkswagen Group date back to the 1970s. The informal cooperation between the two companies continued with the launch of the new ŠKODA FAVORIT. ŠKODA had designed the vehicle with a hatchback body and front-wheel drive entirely in-house, making the FAVORIT a notable exception in the Eastern Bloc. At that time, vehicles were almost exclusively produced under licence from Western European car manufacturers. In Wolfsburg, Volkswagen tested a prototype ready for series production and considered equipping the model with Volkswagen engines as well as alternative brake linings and other modified components.
These plans were scrapped, however, due to financial reasons. Nevertheless, after the collapse of the communist regime in November 1989, the positive impressions of the ŠKODA FAVORIT and the recently established contacts between Wolfsburg and Mladá Boleslav led to wide-ranging talks about the possibility of collaboration, and the negotiations soon gained momentum. The initial situation was clear: without a strong strategic partner, ŠKODA would have no chance on the world market. Annual production capacity at the time was barely 200,000 vehicles and the portfolio consisted of outdated rear-engine models alongside a single contemporary model family – the FAVORIT and the FORMAN estate. The brand’s future lay in the privatisation of the hitherto stateowned company. In addition to the FAVORIT model series, the car manufacturer’s greatest assets included its skilled and highly motivated workforce and the strong tradition of vehicle manufacturing at the Mladá Boleslav site.
Initially, 24 companies were considered as potential partners before talks with eight selected car manufacturers from Europe and overseas took place in the summer of 1990 under the leadership of Prime Minister Petr Pithart. Four of these manufacturers submitted a specific offer. However, in August 1990, two of these competitors dropped out, leaving the Renault/Volvo alliance and the Volkswagen Group in the running. Further exploratory talks were held on 9 and 10 December 1990 and finally, on 21 December 1990, the government signed a contract with the Volkswagen Group, who had proposed a more attractive concept with a view to ŠKODA AUTO’s future development. Long and extensive negotiations followed between various teams of experts as well as management representatives from the Volkswagen Group and Czech partners. The talks were led by Deputy Prime Minister František Vlasák and, most notably, Minister of Industry Jan Vrba. Hanuš Holzer, who later became a consul in Basel, was also involved as an informal mediator.
On 28 March 1991, the Minister of Industry, Jan Vrba, on behalf of the Czech Republic, and Carl H. Hahn, as Chairman of the Board of Management of the Volkswagen Group, signed the main agreement on the establishment of a joint venture for the production of ŠKODA vehicles. After the Volkswagen Group had fulfilled its contractually agreed commitments, it received 31 per cent of the shares in ŠKODA AUTO on 16 April 1991 for a contribution of 620 million marks. Subsequently, the new shareholder gradually increased its stake until it held 100 per cent of the company shares as the sole shareholder on 30 May 2000.
Comprehensive investment programme lays the foundation for impressive development
The basis for ŠKODA AUTO’s dynamic development in the following three decades was a comprehensive investment programme. Several hundred billion Czech crowns were spent on research and development, the expansion of production capacities and the consistent development of ŠKODA AUTO’s sales and customer service network in the Czech Republic. The number of employees in the development department has grown from around 600 in 1991 to more than 2,000 highly qualified personnel today. To provide its employees with the best possible training and prepare junior staff for their careers at the company, ŠKODA AUTO now has its own vocational school and offers several dual courses of study at the ŠKODA AUTO University of Applied Sciences.
In terms of products, ŠKODA AUTO initially expanded the FAVORIT/FORMAN model range under the umbrella of the Volkswagen Group to include the PICK-UP light commercial vehicle. This model range was in great demand thanks to its excellent price-performance ratio, enhanced technology and high quality. In 1994, ŠKODA presented the FELICIA, the successor to the FAVORIT. With this model, innovative features such as ABS, airbags, air conditioning, power steering and the Group engines 1.6 MPI and 1.9 D made their way into the ŠKODA portfolio.
The first model that ŠKODA AUTO developed entirely under the umbrella of the Volkswagen Group debuted in September 1996 with the first generation of the modern OCTAVIA based on the A4 platform: the compact model marked the beginning of a new chapter for ŠKODA: the OCTAVIA was produced at one of the most advanced car plants in Europe and quickly rose to become the brand’s bestseller. In autumn 1999, the new ŠKODA FABIA small car replaced the FELICIA model series. Since then, both the OCTAVIA and the FABIA have become ŠKODA’s most sought-after model series: the OCTAVIA, now in its fourth generation, is winning over customers worldwide, and the fourth-generation FABIA is already in the starting blocks.
ŠKODA added the SUPERB to its model portfolio in 2001, bringing back one of the most sonorous and traditional model designations in the company’s history for its new flagship. The current third generation also runs off the production line as the SUPERB iV with plug-in hybrid drive. In September 2016, ŠKODA launched its SUV campaign with the premiere of its large SUV model ŠKODA KODIAQ, opening up a new, dynamically growing vehicle segment for the Czech car manufacturer. Today, besides the KODIAQ, the SUV range also includes the KAROQ and KAMIQ model series as well as the all-electric ENYAQ iV. In addition, the ŠKODA KUSHAQ, developed exclusively for the Indian market, recently celebrated its world premiere.
Based in the Czech Republic, but at home all over the world
In the 30 years under the umbrella of the Volkswagen Group, SKODA AUTO has expanded its workforce from 17,000 employees in 1991 to around 42,000 employees worldwide today. The company currently produces ten attractive, state-of-the-art model ranges and delivers them to customers in over 100 markets. ŠKODA AUTO’s dynamic development is also reflected in its global deliveries: while the manufacturer produced 172,000 vehicles in 1991, the number has since increased sixfold. In 2020, the carmaker delivered more than one million vehicles worldwide for the seventh year in a row. In addition to the three original Czech production sites, the company now also manufactures in China, Russia, Slovakia and India, mainly through Group affiliations, as well as in Ukraine in cooperation with a local partner.
In addition to cars, ŠKODA AUTO designs and produces components and assemblies, such as engines and gearboxes within the Volkswagen Group. Also, the company has overall responsibility for the activities of the entire Volkswagen Group in India as part of the INDIA 2.0 project and has assumed this role for the regions of Russia, including the CIS states, and North Africa as of 1 January 2021.
With the NEXT LEVEL ŠKODA programme for the future, the car manufacturer is now taking the next steps to successfully lead the company through the new decade, focusing on three priorities: Expanding the model portfolio towards the entry-level segments, opening up new markets for further growth in the volume segment, and engaging with diversity and sustainability in every aspect of its work.
A timeline of success: an overview of the cooperation between ŠKODA AUTO and the Volkswagen Group
Background (1978 – 1988)
1978 Volkswagen applies to the Czechoslovak authorities for permission to test vehicles made by the German brand on Czechoslovak roads.
3 – 5/1979 Exploratory talks on the possible purchase of brake pads and Volkswagen EA 801 series engines for ŠKODA vehicles.
8/1985 Resumption of talks following the launch of the ŠKODA Type 781 project (future FAVORIT). Meeting of the Foreign Ministers of the ČSSR and the Federal Republic of Germany at the Volkswagen headquarters in Wolfsburg. 9/1986 Submission of a specific offer to build EA 111 engines under licence.
8/1987 Production of the ŠKODA FAVORIT is launched in Mladá Boleslav.
9 – 11/1987 Volkswagen conducts a test series with a prototype of the future ŠKODA FAVORIT with VW engines of the EA 827 and EA 111 series.
03 – 10/ 1988 The planned cooperation in the production of EA 111 (1.05; 1.3-litre) and EA 827 (1.4; 1.6; 1.8-litre) licensed engines is shelved, mainly for financial reasons. However, the management of the Volkswagen Group is now familiar with the details of the new Czech vehicle.
Negotiations on privatisation and integration into the Volkswagen Group (1989 – 2000)
11/1989 The non-violent ‘velvet’ revolution in Czechoslovakia brings an end to the communist dictatorship. The country prepares for free elections and paves the way for a democratically elected government.
1/1990 Petr Hrdlička, head of R&D at the AZNP car plant in Mladá Boleslav, contacts Volkhard Köhler, the Volkswagen Group’s Director of Foreign Cooperation. He suggests that Volkswagen get involved in the proposed privatisation of ŠKODA.
2/1990 On 4 February 1990, the first informal meeting between the Chairman of the Board of Management of the Volkswagen Group, Carl H. Hahn and Volkhard Köhler with the Czechoslovak Foreign Trade Minister Slavomír Stračár takes place at Prague-Ruzyně Airport.
3/1990 Resumption of talks between the Czechoslovakian representatives and the management of the Volkswagen Group. On 22 March, Carl H. Hahn and Volkhard Köhler come to Mladá Boleslav for the first time with a delegation from Wolfsburg.
6/1990 The search for a strategic partner officially begins: The Czech government writes to eight of the original 24 potential candidates, and four well-known car manufacturers then submit an offer.
8/1990 The choice of a strategic partner is narrowed down to the Renault/Volvo alliance and the Volkswagen Group as the largest car manufacturer in Europe. The German company respects the Czech side’s wish to promote the traditional ŠKODA brand, to keep its own development in the Czech Republic and to continue production of the FAVORIT/FORMAN model series. Volkswagen submits a comprehensive investment plan.
12/1990 At a special meeting of the Czech government on 9 and 10 December, the Volkswagen Group is awarded the contract. In addition to the government’s economic council, the trade union at the ŠKODA plants and an external consulting and auditing firm also supports this decision. On 21 December 1990, the partners sign the cooperation agreement.
12/1990 The collapse of the centralized economy and significant declines in important export markets hit ŠKODA hard. The domestic market, which is very important for the company, collapses almost completely. In 1990, the company delivered only around 27.000 units instead of the expected 126.000 vehicles. In total, 187,181 vehicles are produced in Mladá Boleslav, Vrchlabí and Kvasiny in 1990.
28 March 1991 On Thursday, 28 March 1991, the Czech Minister of Industry, Jan Vrba, and Carl H. Hahn, Chairman of the Board of Management of the Volkswagen Group, sign the contract establishing a joint venture for the production of ŠKODA vehicles.
16 April 1991 Once the contractual agreements are fulfilled, ŠKODA will become the fourth brand in the Volkswagen Group alongside VW, Audi and SEAT.
10/1991 On 8 October, German President Richard von Weizsäcker visits the town of Mladá Boleslav. He had been campaigning for the privatisation of the car manufacturer since spring 1990.
11/1992 The Supervisory Board of the Volkswagen Group approves the investment plan for ŠKODA AUTO. It provides for investments of DM 3.749 billion by the year 2000.
6/1994 On 16 June 1994, ŠKODA produces its one-millionth front-wheel-drive vehicle.
10/1994 Debut of the new ŠKODA FELICIA, the first ŠKODA model with components from the Volkswagen Group.
9/1996 One of the most modern car plants in Europe is opened in Mladá Boleslav. The first product is a hatchback saloon in the lower mid-class – the first generation of the modern OCTAVIA. It is the first ŠKODA model to be based on a Volkswagen Group platform.
05/2000 Volkswagen becomes the sole owner of ŠKODA AUTO.
12/2014 ŠKODA AUTO delivers more than one million vehicles worldwide for the first time