Volkswagen’s Skoda shifts some SUV production to Germany

Berlin: Volkswagen AG’s Czech division Skoda said it will shift some production of sport-utility vehicles (SUVs) to Germany to meet growing demand for its models.

Executives at Europe’s largest automotive group and its Czech subsidiary have been looking at ways to boost output at Skoda, including building a new factory outside the brand’s Czech home, to help it keep up with booming demand, company sources told Reuters in March.

On Monday, Skoda said it will assign some production of its latest Karoq SUV to a Volkswagen (VW) plant in Germany’s northwestern town of Osnabrueck starting at the end of this year and in 2019 to meet high demand for the model.

The VW factory in Osnabrueck, which also builds the Porsche Cayenne SUV, will paint and assemble the Skoda Karoq, but the move will only be temporary with the bulk of Karoq production set to remain in the Czech Republic, Skoda said.

Volume brand Skoda has blossomed under nearly 30 years of VW ownership to become one of the German group’s profit drivers, even beating luxury brand Audi’s  operating margin, thanks to cheap labour and to VW’s cost-saving modular platforms.

Skoda’s superior car reviews and profitability repeatedly caused tensions within the VW group as the core namesake brand grapples with costs for the “Dieselgate” scandal while pushing painful restructuring involving thousands of job cuts.

Last year, VW managers and labour representatives were seeking to curb competition from Skoda by moving some of its production to Germany and make the Czech unit pay more for shared technology, sources told Reuters.