Automotive industry

The European automotive industry is undergoing a fundamental transformation, which is being reflected in the situations of individual companies. In spite of that, the automotive sector in the Czech Republic is maintaining its position as a strong pillar and driver of the domestic economy. Final manufacturers of automobiles and their suppliers account for approximately 9% of the Czech Republic’s gross domestic product and nearly one-fourth of the country’s total exports. At the same time, the Czech automotive industry excels in the area of research and innovation, accounting for nearly one-third of industrial investments in research and development and having a strong multiplier effect on related sectors.

The automotive industry is also a major employer in the Czech Republic. A total of 180,000 people are directly employed in the industry; including related sectors, that figure rises to approximately 500,000. Companies operating in the automotive industry also contribute significantly to the national budget, into which they pay roughly CZK 80 billion annually.

The Czech Republic is a notable player also in a global comparison. Within the European Union, the country ranks third among the largest producers of passenger cars. In per-capita terms, it is the second-biggest passenger-car producer in the world and the global leader in the bus segment.

It remains true that the Czech automotive industry, including its strong supplier sector, is a synonym for quality, which is due to a combination of the country’s industrial tradition, skills, technical education and strong know-how. Thanks to its position in the centre of Europe and favourable labour costs, the Czech Republic remains one of the most attractive locations for new investments in the automotive industry.

A successful 2024

The Czech automotive sector enjoyed success in 2024, though it wasn’t an easy year. In addition to repercussions of the COVID-19 pandemic, the year was marked by unstable supply chains and the impacts of the war in Ukraine and other conflicts elsewhere in the world. In comparison with previous years, however, improvement was registered in the supply of necessary raw materials and components.

High prices of certain inputs, particularly energy, continue to be a long-term challenge. The unsatisfactory situation in the domestic labour market was also a limiting factor for some companies last year.

In the course of the year, suppliers began to feel the effects of the unfavourable developments in the German economy, to which the Czech automotive industry is closely tied, as more than 30% of its exports go to Germany. At the end of the year, domestic carmakers slowed production in correlation with falling demand and thus declining vehicle sales on the main European markets.

Return to pre-crisis production values

Despite everything, most companies in the automotive industry managed to achieve better results than in the preceding year. This refers particularly to final production, the volume of which exceeded the pre-COVID maximum.

In the course of 2024, a total of 1,452,881 passenger cars rolled off of domestic assembly lines, a 3.9% increase over the previous year. In addition to that, 4,489 buses, 1,522 freight vehicles, 909 motorcycles and 17,862 trailers were manufactured.

The largest manufacturer in the Czech Republic is Škoda Auto, which accounts for nearly 62% of the total volume of passenger-car production. In 2024, a total of 896,933 vehicles rolled out of the factory gates in Mladá Boleslav and Kvasiny. Hyundai Motor Manufacturing Czech in Nošovice manufactured 330,890 vehicles (22.5% share) in 2024 and Toyota Motor Manufacturing Czech Republic in Kolín turned out 225,058 cars (15.5%). Of the total number of vehicles manufactured, 151,162 were electric, of which 113,232 were purely battery powered and 37,930 were plug-in hybrids. In percentage terms, electric vehicles thus comprised 10.4% of production, which was less than the carmakers had anticipated.

Bus production saw a year-on-year decline of 14.5%. The largest company in this segment, Iveco Czech Republic, manufactured 4,040 buses and an additional 604 buses in built-up form, which were then completed at the company’s sister plant in Foggia, Italy. A total of 416 buses were manufactured at the SOR plant in Libchavy.

Tatra fared well in 2024, as its production volume increased by 6.3% year on year, with a total of 1,522 freight vehicles leaving its plant in Kopřivnice.

Final producers also include manufacturers of small and large trailers, which together turned out a total of 17,862 units. The traditional Czech motorcycle manufacturer Jawa Moto reported 20.4% year-on-year growth in production volume with a total of 909 units produced.

2025 will be demanding

The ongoing conflicts in Ukraine and the Middle East, rising geopolitical tensions, escalating tariffs and high raw-material and energy prices are only a few of the challenges that the automative sector will face in 2025. It can therefore be expected that this year will be more rather than less demanding than the previous year.

European legislation will also have a number of negative impacts on markets and production. In addition to increasingly strict emissions and technical requirements, it will be necessary to deal with a number of artificially created obstacles in 2025. It can be expected that rapid growth in the share of electric vehicles due to CO₂ regulations will negatively impact markets, whether by limiting the number of available models with internal-combustion engines or through upward price pressure due to impending fines for fleet emissions.

A perhaps even more difficult situation awaits the supplier sector, which faced serious problems last year. Pressure to invest in electromobility means fewer models and uncertainty in planning, as falling demand is reflected in declining orders and production inefficiencies. The degree to which the sector is tied to the German market, where the largest number of customers for its products are located, is becoming fully apparent. Layoffs will be on the agenda also in the Czech Republic, though to a significantly smaller extent than in Germany, for example.

Uncertainty persists, dialogue continues

For the automotive sector this year and in coming years, a fundamentally important aspect will be how Europe approaches the practical achievement of its ambitious decarbonisation targets, according to which only zero-emission vehicles should be sold on the European market in 2035. This deadline should be subject to review in 2026, though in the interest of limiting market impacts, it is appropriate to reassess this target already this year due particularly to customers’ declining interest in electric vehicles. The results of talks regarding European regulations and possible amendments will depend on the approach of the EU member countries.

The further development of both the Czech and European automotive industry will be influenced also by events in the United States. The potential imposition of tariffs on goods from the EU, as called for by President Donald Trump, would negatively impact exports of European automobiles, thus also affecting Czech suppliers.

Companies in the automotive industry are aware that they must continue to invest in automation, digitalisation and artificial intelligence, while focusing on innovation and development of technologically advanced products, which is necessary in order to maintain competitiveness. However, the complicated economic situation and unpredictable regulatory developments are dampening companies’ willingness to invest.

In any case, however, the automotive industry in the Czech Republic has a firm foundation and despite the challenges that it will face this year and in the years to come, it will remain a strong sector. The Czech Automotive Industry Association, whose membership comprises most of the country’s major automotive companies including suppliers as well as other institutions and organisations contributing to the sector’s development, is encouraging a discussion on the future direction of the sector and the main trends consisting in zero-emission mobility, digitalisation and automation, connectivity, the use of artificial intelligence and the development of technologies for autonomous vehicles. The aim is to create such conditions that will enable the automotive industry to remain a thriving sector while ensuring available mobility for everyone in the Czech Republic.