Škoda has sold over 25,000 cars annually in Slovakia for the past five years, and 1999 was no different in this respect. The Czech car maker sold over 30,000 vehicles in 1999, taking more than 50% of the market and far outpacing other car makers. But while tradition and Škoda's low prices have always made it hard for other car importers to compete, representatives of some car importers complained that an unlevel playing field was making their tasks more difficult still.
The main complaint of importers like Volvo and Mazda was that government-imposed customs duties of up to 17% were making their already pricy cars even more expensive, giving an unfair advantage to Škoda which had to pay no customs duties. In addition, importers said, their interests were being ignored by the very group that should have been protecting them - the Slovak Automotive Industry Association (ZAP SR).
Fighting for fair competition and championing the concerns of automotive-related businesses were the original goals which ZAP was formed to promote in 1993. The group's main aim was to lobby the government to achieve better legislation and create a good trade environment in the automotive industry.
But some car importers are now unhappy with ZAP, with one saying that the association's representatives were like a " Škoda and Volkswagen family," adding that Škoda had unfair market advantages that were not addressed by the association or the government. Škoda representatives countered that the accusation was ridiculous, and that Škoda's success was based on its cost-friendly and quality cars.
According to Anton Strnad, director of Mazda in Slovakia, ZAP was not active enough in pushing through changes in parliament that would help make the market fairer because interests were being protected. "I believe that the association does not represent all current importer's interests sufficiently," he said. "It is like a family association of Škoda and Volkswagen. Only Ľudovít Ujhelyi [ZAP's Vice-President of the car-importers section, and director of Škoda Auto's Seat-import division] goes to meetings with ministers or the government, and we don't exactly know what goes on in them."
Strnad wasn't the only disenchanted ZAP member. Horst Vilček, director of the Volvo dealer Top Auto Bratislava, agreed that ZAP was ineffective and added that it was dominated by the interests of its leadership. "They are not the right group to represent all importers," he said. "The president is Jozef Uhrík, a member of the board at Volkswagen, and he works hand in hand with Škoda."
Ujhelyi was not available for comment, although Štefan Chudoba, director of Škoda Auto Slovensko and a vice-chairman of ZAP's board, refuted the claims. "Such criticism is not justified," he said. "The conditions in Slovakia are the same for every car seller. The difference is that Škoda dealers are more customer-oriented than other car dealers."
In 1999, Škoda sold 31,451 cars which made up 50.6% of the market. The next closest competitor, Daewoo, followed with 7,951 cars sold, and a 12.8% share. Third on the market was Volkswagen, which is a majority owner of Škoda.
According to Alfred Richter, who is responsible for the automotive industry at the Economy Ministry, the success of Škoda in Slovakia was based on tradition as well as low price and quality. "Škoda is considered to be 'our' [Slovak] car by many people because they were here long before anyone else and they have a very good provider and service net in Slovakia," he said. "With the latest improvements in the quality of Škoda cars, they are the winners," said Richter.
One advantage that Škoda naturally inherited was the customs union between the Czech and Slovak Republics. "Due to the existing Czech and Slovak customs union, Škoda cars are imported without a customs duty," said Mazda's Strnad. "That puts us at a disadvantage. We have to pay a 17% duty on our cars because they are Japanese-made. European importers have to pay far less - 3.7%. But this is still a lot compared to the zero duty for Škoda."
Richter admitted that the zero duty might be an advantage for Škoda, but said that the customs union was a part of state policy which covered more than just cars. "We cannot influence the economic policy of the state," Richter said.
Škoda's Chodoba agreed, arguing that Czech-Slovak links were vital to the country's economic health. "If there weren't a customs union, there wouldn't be any Slovak exports to the Czech Republic. Our goal is to make the customer happy. It doesn't matter what the other importers say," said Chudoba.
Price was the biggest factor for Slovaks when considering buying a new car according to Milan Urban, chief of ZAP's secretariat. A new Škoda Felicia costs 285,000 Slovak crowns ($6,627), while a new Škoda Octavia, the firm's luxury model, can cost as low as 420,000 crowns ($9,760). Brand new Mazdas and Volvos, on the other hand, may cost well over 500,000 crowns ($11,620). "This is why Daewoo is right behind Škoda," said Urban. "We [ZAP] cannot influence the customer's choice. And Škoda's special position is conferred by the [customs] union."
ZAP has 101 members; 33 are licensed importers, while the rest are made up of production companies and educational centres related to the automotive industry like Technical Universities in Bratislava and Košice.
Urban argued that ZAP had in fact successfully protected the interests of importers through such efforts as thwarting a plan proposed by Finance Minister Brigita Schmögnerová in November 1999 to slap a graded luxury tax of up to 40,000 crowns on cars that cost more than 500,000 crowns. "Such a regulation could have killed the Slovak car market," said Urban.