At the end of December, 1985 two Czech cycling enthusiasts, a mechanic Vaclav Laurin and a bookseller Vaclav Klement, started to produce bicycles of their own design under patriotic name of Slavia, which ideally suited the national mood prevailed at that time. A few years later, in 1899, they founded the company Laurin & Klement Co. that manufactured motorcycles, which very quickly got a lot of support among drivers and received several awards in racing competitions. By 1905 the company curtailed production of motorcycles and turned to making cars.

Similalar to motorcycles, the first company’s car called Voiturette A became extremely popular and later turned to be the indisputable archetype of Czech automobile classics. The success of the first company’s car provided Laurin & Klement Co. with stable position in rapidly developing international automobile market, so that the company decided to expand manufacturing. Production volumes grew so quickly that soon the capacity of individual enterprise was exceeded and in 1907 the founders of Laurin & Klement Co. began the process of transforming the company into a corporation. Thus, they launched international business of ŠKODA, which gradually acquired greater and greater importance. Production capacities were constantly expanding and in 1914 the company ŠKODA had already participated in production of military equipment.

Due to strong country economic development in the 1920s the Company, which produced by the time a decent number of various models of cars, trucks, buses, aviation engines, and agricultural machinery, came to quite a clear need to join a strong industrial partner. Therefore, in 1925 the Company merged with Pilsen ŠKODA Co., which denominated the termination of the brand Laurin & Klement. In the early 1930s the sphere of car production was assigned to a separate public company within ŠKODA Group of companies, which named Automotive manufacturing company, ASAP. At the end of the crisis of the 1930s the Company made a breakthrough with their new model ŠKODA Popular.

German occupation from 1939 to 1945 negatively affected the Company, which was deeply integrated into industry of German Empire. Production of civilian vehicles was reduced dramatically while all the powers of the company were directed to serve the Reich.

As a result of broad process of nationalization, which started at the end of the war, in 1946, the Company became a national enterprise called AZNP. Due to political and economic changes of that time, the Company had a monopoly on production of passenger cars.

Based on traditional methods of production and past success, Czechoslovak economy managed to maintain relatively high standards of quality for decades even in the socialist period, in spite of the imposed planned economy and unfairly inflated rates of economic development. These standards were put in doubt only in the late 1960s due to emergence of new technologies in the West. The mid 1970s designated the beginning of a period of severe stagnation in Czechoslovak economy, which negatively influenced the cars’ manufacturers from MladaBoleslav despite of their leading position in the Eastern European market. Production volumes began to increase only with entry of the model ŠKODA Favorit in the market in 1987.

After the political changes in 1989 and transition to market economy, the Government of Czechoslovakia and the management of the company ŠKODA started to look for a strong international partner, which experience and financial investments could provide the Company's competitiveness in the long term. Therefore, when the Government of Czechoslovakia decided to start cooperation with German sindicate of companies Volkswagen Group, a joint venture of Volkswagen and SKODA became an apparent choice. The new company was formed on 16 April, 1991 under the name ŠKODA, automobilová a.s., and became the fourth brand in Volkswagen Group along with VW, AUDI and SEAT.