European auto producer steers into Ukrainian market
A brand new auto assembly plant in the Zakarpattya Oblast began turning out its first Octavia cars last month, and Skoda Auto officials say if the venture is successful, another plant is sure to follow.
Journalists touring the plant in the village of Solmonove near Uzhgorod on April 4 watched as cars rolled through two small‑scale assembly lines at a rate of more than a dozen a day.
The $15 million plant was built by Eurocar, a closed‑joint stock company set up by Ukrainian investors to produce Skodas in Ukraine.
The Volkswagen Group, which acquired the Czech Skoda Auto company in 1991, gave the green light to the Ukrainian version of the Skoda Octavia after the vehicle underwent final tests in the Czech Republic on March 15. The company also gave its approval for the car’s assembly at the Eurocar plant from large components imported from the Czech Republic.
The Zakarpattya plant occupies 4,320 square meters and employs 150 workers, who took a special training course before starting work.
The Skoda plant is located in the Zakarpattya Special Economic Zone, giving it tax breaks that allow it to produce cars with a price tag 4 percent lower than their Czech‑produced counterparts.
The Fabia, another mid‑priced car, is also slated to roll off the Zakarpattya plant’s assembly line by the end of the year.
According to Eurocar development department head Kostyantyn Kyrylin, the plant is expected initially to produce 15,000 vehicles a year.
“If all our calculations are correct, we will start the second stage of the project,” Kyrylin said.
Kyrylin said the second stage is expected to attract $200 million in investment to construct another auto plant in Zakarpattya close to the existing one. This will allow the company to bring production up to 40,000 cars a year by 2004.
Ukrgazbank acts as financial manager for the Eurocar project and is attracting venture capital for this purpose.
The Ukrainian Skodas will be sold only in Ukraine, since they are designed with higher suspension to deal with rutted roads common in Ukraine.
“Our cars have become popular with European drivers, and we hope they will be popular among Ukrainians as well,” Skoda Auto managing board head Vratyslav Kulganek said.
According to Skoda Auto data for Eastern Europe, sales of Czech‑made cars in Ukraine grew in 2001.
Eurocar is building a showroom for Ukrainian Skodas near the Nyvky metro station in Kyiv.
“It will be a modern auto showroom that will meet the requirements of the Volkswagen Group,” Kyrylin said. He said the showroom should be ready by the end of the year.
The importation of Czech‑made Skoda Octavias will continue until August. Skoda four‑wheel‑drive and sport‑utility vehicles will continue arriving from abroad, as there are no plans to assemble them in Ukraine.
In the future Octavias might be assembled from Ukrainian‑made parts.
According to Kulganek, when annual sales of Octavias reach 60,000 cars, it will be more profitable to build a new plant to assemble cars from Ukrainian parts.
More than 100 Ukrainian factories have said they are ready to produce components for the Skodas, and Eurocar is checking them all to see if they meet Volkswagen’s standards, Kyrylin said. He added that Volkswagen is hoping some of those factories could soon start producing parts for the Octavias.
Kulganek said that if Ukrainian assembly lines produce high‑quality cars, the Zakarpattya plant may begin producing Volkswagen models as well.
