Business Czech Republic seeks to boost car production, deepen dependence

14-03-2014 14:51 | Chris Johnstone

In spite of warnings that it might be too dependent on the car sector, the Czech Republic would like to increase production even further with an eye on existing manufacturers and their suppliers.

Photo: Klára StejskalováPhoto: Klára Stejskalová The Czech Republic was the world’s second most successful, or dependent, country in the world for car production in 2012. With 111 cars produced per thousand people, the country trailed only Slovakia, with 171 cars produced per head.

Although the countries headed in different directions in 2013, with Slovak production at record levels of 980,000 while Czech output fell back by 3.9 percent to 1.13 million, the relative dependence on one single sector is a constant.

This year Czech production is expected by Martin Jahn, head of the Czech Automobile Industry Association (SAP), to bounce back with car output surpassing the record levels set in 2011. In that year, the auto sector accounted for almost 8.0% of Czech GDP and 22% of overall output by the manufacturing sector.

The Czech Republic’s three major car producers and smaller producers of buses and lorries plus their many subcontractors employed 108,968 people last year, slightly down on the previous year. The eleven vehicle manufacturers shed 2.2 percent of their workforce with the 105 subcontractors cutting their workforce by just 0.35 percent. An encouraging factor for the future was the 4.5 percent increase in staff employed on research and development.

In the short term though, Czech dependence on the auto sector looks set to grow. Volkswagen Group confirmed Friday that Škoda Auto’s Kvasiny plant and not a Spanish rival will produce a new large utility vehicle. Those cars are likely to come off production lines in 2016 or 2017.

As well as being in Wolfsburg, Germany, for that announcement, Minister for Industry and Trade, Jan Mládek, was in South Korea at the start of the month. He held talks with the country’s biggest tyre producer, Nexen, which now looks certain to open a Czech factory following the announcement by Škoda Auto that it will be supplying tyres for its Rapid and Octavia models.

More interesting perhaps, is the talks that also took place with car manufacturer Hyundai, which already has a Czech plant at Nošovice which increased production last year to 303,460 units.

Hyundai has ambitions to produce and sell around 7 million cars worldwide by 2017 based on the introduction of 22 new models. That compares with its plans for production and sales of around 4.9 million this year. Most of the new models will be replacements or derivatives for existing designs, but around a third are expected to be new.

The Czech Republic’s third car maker, the TPCA joint venture of Peugeot-Citroën and Toyota, has invested around 15 billion crowns in plant and production line improvements linked with the production of new models of the Peugeot 108, Toyota Aygo, and Citroën C1. Production should start in May with the new models on sale from June.

For all the Czech auto success, there are some shadows on the horizon. Long-term, it seems inevitable that some of the fastest developing markets, such as China, Brazil and India, will increase local production and that is likely to hit the current overproduction in Europe. Also, Czech car producers have mostly stuck faithfully with petrol and diesel driven combustion engines, any major industry shift to electric or natural gas models could catch them out.

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