European automobile industry

Slovakia gets the highest per capita automobile production on earth.

Whenever VW obtained a tiny production plant from BAZ in Bratislava in 1991, the Slovak automotive industry embarked on its accelerated success tale. Slovakia ended up being happy to develop a production base predominantly for high-end SUVs.

But far more impressive is that Slovakia has got the highest per capita car manufacturing on the planet. Once PSA together with Hyundai subsidiary Kia joined VW in Slovakia, automobile manufacturing very nearly doubled. Ergo, despite its small size, Slovakia is, after Czech Republic and Poland, the third-largest car producer among the new EU users.

Because the automotive industry became set up as a principal pillar of Slovak manufacturing, this is rewarded with an investment-friendly environment through the creation of industrial parks, income tax breaks and government subsidies to entice manufacturers.

Marketplace need

Slovakia, with a populace of 5.4 million, is amongst the two tiniest main European new EU people but is among the best performers. Following reforms, the economy and consumption have observed successful development in the last five years.

But Slovak automobile ownership is fairly reasonable set alongside the remainder of Europe and, such as the other new EU nations, car or truck imports tend to be a key point. Imports account for one out of each and every two car purchases, as well as the average car age, while reducing, is 13 many years. Imports of cars a lot more than ten years old aren't permitted, and a certificate of compliance with EU norms is a necessity.

In 2008, new vehicle sales reached a top of 97, 000, a growth of 16.4percent, thanks to the strong growth of the Slovak economic climate recently plus the adoption regarding the euro. During 2009, new automobile product sales dropped to 90, 400. The Czech brand Škoda, long familiar to Slovakians, may be the leader in terms of brand-new car product sales.

Figure 35: product sales and production (in products) in comparison between 2008 and 2012

Figure 36: Light vehicle sales and production contrasted (in units), 2006–09

Automotive player

In general, 488, 021 traveler automobiles were manufactured in Slovak plants in 2008, up from 178, 000 in 2005, because of increasing organization of international production capacities. Domestic light automobile manufacturing declined by 19percent during 2009.

In 2011, VW will begin production of the latest little family car “Up!” near Bratislava, perpetuating the present trend toward small and efficient cars. Manufacturing website builds the Škoda Octavia together with VW Touareg, Audi Q7 and Porsche Cayenne.

Both Kia and PSA began their investments in Slovakia in 2006. Kia builds cars near Žilina, 200 kilometers from Bratislava. Its facility produces the small SUV Sportage while the small family members vehicle Cee’d.

PSA features create an assembly-line in the western Slovak city of Trnava, in which it develops the Peugeot 207, probably one of the most well-known tiny automobiles in Europe, while the efficiency oriented compact van Citroen C3 Picasso.

If required, Slovakia could increase automobile manufacturing to a maximum yearly capability of around 900, 000 units.

The group of passenger vehicle producers could be increased due to the fact Chinese Jianghuai vehicle business is within negotiations using the Slovakian national about the establishment of a manufacturing unit there.

Inside downturn

Prior to the slowdown, Slovakia ended up being probably the most quickly developing of European economies. The united states enjoyed prosperous economic development with a nominal GDP upsurge in 2008 of 36percent on 2005 levels.

Figure 37: Light car product sales by brand name (in products), 2007 and 2009

Figure 38: Light car manufacturing by brand (in units), 2007 and 2009

Like other European countries, Slovakia has already established to manage layoffs in the present crisis, nonetheless it hasn't, been as severely impacted as several other markets. However, GDP fell considerably last year. The Slovak automotive sector has-been recognized for creating large gas-guzzling cars.

But Slovakia’s adoption of euro features resulted in brand new investment in the production of economic climate cars, you start with the VW “Up!” The gains in economy vehicle production might offset the losses from the downturn within the premium SUV segment.

Confronted by the slowdown, the us government reacted rapidly by applying different measures, due to the fact automotive business makes up about approximately 33percent of GDP. Slovakia was among the first east European economies to adhere to the example of Germany and France in supplying subsidies to residents whom wanted to trade in their old automobiles and purchase brand-new ones.

Appropriately, sales of personal automobiles expanded, and Škoda retained its leading place. However, the subsidy did bit to guide the domestic, mainly high-end, manufacturing. Regarding production part, the us government guaranteed the possibility of short-time work and was prepared to subsidize every office until 2010.

A summary of investment activities reveals that no programs have now been canceled currently, because investors however regard Slovakia as a favorable place. But some execution dates have already been delayed, given the present economic situation. Nevertheless, PSA has even increased its production for the Citroen C3 Picasso in Trnava due to strong need.

And Kia Motors has broadened ability in its engine production plant in order to supply its affiliate, Hyundai, which includes a plant when you look at the neighboring Czech Republic. Additional investment initiatives were additionally launched by, Getrag and Continental, after 2008.

Dangers and possibilities

Risks

Task into the sector is largely concentrated in Bratislava and Trnava areas; hiring and retaining competent work is starting to become progressively challenging in this area

• VW’s entry to the Bratislava region had been followed closely by compared to several suppliers, which boosted the capital’s local economic climate. VW employs about 10, 000 people as of this center. Sought after for employees to staff the production businesses during the plant together with supplier areas has created an everyday workforce migration from as much as 100 kilometers away.
• The businesses of PSA in Trnava (50 kilometers north of Bratislava) and Kia in Zilina (200 kilometers northeast of Bratislava) will likely use additional stress on labor access, leading to higher wages and more tough problems for smaller component manufacturers developing brand-new businesses.

Options

Positive environment for automotive manufacturing and investment

• The Slovak national was proactive in its transactions with large investors like VW, PSA and Kia, providing tailored infrastructure solutions and attractive bonuses. This method, related to persuasive reforms particularly an appartment taxation and a user-friendly corporate tax system, has actually helped to secure these prestigious jobs.
• The country’s economic climate shows a definite consider developing commercial production tasks. The country’s dependence on the production sector, as well as the automotive industry particularly, affords an acceptable foundation for let's assume that businesses in Slovakia will relish a good environment for many years in the future. Nevertheless Government may turn to advertise service- and R&D-oriented projects in the foreseeable future in order to lower dependence on manufacturing.

Economic security

• Slovakia followed the euro in January 2009, after meeting the commercial criteria. This may deliver stability into the high-grade export tasks and preclude losings triggered by money fluctuations. The euro use ended up being one of the main reasons that VW chose Slovakia as a production website because of its new “Up!” family members design.