The announcement followed several years of a debate within the company whether to expand its model range to five lines from four. It also dispels uncertainty whether Skoda might transfer some of its production from the Czech Republic to its overseas plants.
The new SUV model is planned for production in 2009, Martin Jahn, a Skoda Auto board member, told Dow Jones Newswires. Skoda will produce its new model line at its plant in Kvasiny, some 130 kilometers (80 miles) east of Prague, Jahn said.
"Placing the production of Yeti in the Czech Republic despite some spare capacities at other VW European plants is a clear signal of the strengthening role of the Czech Republic within the (Volkswagen Group) concern," Jahn said.
Increased staff levels and the modernization and expansion of two of its three Czech plants will be a key to the company's strategy of having three full-cycle production plants in the Czech Republic by 2010, Skoda Auto said in a statement.
The car maker aims to boost annual car output to 1 million in 2010 from some 600,000 planned for this year.