Škoda Auto seals agreement for Czech expansion

The government has signed a three way agreement which paves the way for the biggest Czech car maker to expand its local production.

Photo: Škoda Auto

The Czech government on Monday signed a three way agreement paving the way for the Czech Republic’s biggest car maker Škoda Auto to significantly boost its production in the country.

The three way agreement between the state, car maker, and Hradec Králové region centres on the creation of a new industrial zone at Solnice Kvasiny. That is the site where Škoda Auto is committed to invest around 7 billion crowns in production capacity for a new SUV type vehicle.

At least 1,300 new jobs should be created by the manufacturer itself with another 400 expected in the region as subcontractors expand their capacity to furnish goods and services to Škoda Auto.

Lubomír Franc, photo: Martin Vlček, Wikimedia CC BY 3.0

The head of the Hradec Králové regional, Lubomír Franc, estimated Tuesday that more than a billion crowns should come from various public sources to develop the industrial site for Škoda Auto. He said that the breakdown would be around 570 million from the government itself, around 300 million crowns from the region, and further top up funds from the Ministry of Industry and Trade, state transport fund, and ministry of health. The final figures should be worked out by the end of Spring, he added.

Škoda Auto says that its final plans for the Kvasiny site could result in investment from it finally totaling around 13 billion crowns.

Kvasiny had long been the Cinderella plant of the Czech car maker owned by German car giant Volkswagen. Kvasiny, the youngest of Škoda’s three plants, currently manufactures the top of the range Superb, the Yeti, and the Roomster. The future of the plant, which employs around 4,500, and produces around 150,000 cars a year has often been called into question over recent years. Under the plans, production could almost double.

Škoda plant at Kvasiny, photo: Karelj, Wikimedia Public Domain

For Škoda Auto, the Kvasiny investment would also make much more tangible board chairman Winfried Vahland’s vision of the Czech carmaker producing 1.5 million units worldwide by 2018.

That ambitious target came under fire last year when auto sector research company IHS Automotrive said that Škoda Auto would be hard pressed to exceed the 1.16 million production mark within four years.

But the manufakturer hit a new record for 2014 when it sold more than one million cars for the first time in its history. Sales rose for the year by just over 12 percent. And this year has also started brightly, January worldwide sales are up 7.5 percent compared with a year ago with around 87,000 cars finding new owners. The company’s move to broaden its model offer will continue later this month when a new version of its top of the range is unveilved in Prague.