Automotive industry

The Czech automotive industry is a fundamental part of the Czech economy. The production of cars, parts and accessories, as well as the increasingly important sector of special-purpose organisations focusing on R&D, software engineering and other supporting services account for nearly one-tenth of the Czech Republic’s gross domestic product, over one-quarter of industrial production and more than one-fifth of Czech exports. The automotive industry directly employs more than 180,000 people in all regions of the Czech Republic and accounts for up to half a million jobs overall.

The Czech Republic as a global player

What followed the 2008 economic crisis can be described as unprecedented. As the number of companies operating in the Czech automotive industry grew and production volumes were gradually ramped up, the Czech automotive industry reinforced its position on the world map. Industrial tradition, skills, technical education, strong know-how and a relatively affordable workforce made the Czech Republic Europe’s third and the world’s tenth largest producer of passenger vehicles (in 2020). This strong growth was slowed by the COVID-19 pandemic, which hit Europe in the spring of 2020. In March and April, production was halted on a scale that had been inconceivable until then. It was paralysed throughout the world to a varying extent for an average of about six to eight weeks. Although the Czech automotive industry recovered very quickly from that shock, driving the production to the limit of its capacities in the second half of 2020, the final production of motor vehicles saw a decline of 19.2% due to production losses, customer caution and other factors. The Czech automotive industry’s total sales of EUR 40 billion reached the level of 2016.

The global automotive industry was supposed to enjoy a restart in 2021. However, the pandemic, disrupted logistics chains, increased demand for consumer electronics, adverse weather and the technological complexity of production have all contributed to the onset of a global chip shortage. The shortage manifested itself in full in the second half of 2021, slowing down and, in some cases, even halting car production in the Czech Republic and other countries. 

The year 2022 was also a year full of difficult challenges for the Czech automotive industry. In a globally closely interconnected industry, the global semiconductor shortage, continued difficulties in supply chains and logistics, the reverberations of the COVID-19 epidemic in China, and the problems caused by the impact of the war in Ukraine continued to manifest themselves. The extreme increase in energy prices and high inflation threatened the competitiveness and sustainability of production in the Czech Republic and, for a significant part of the supply sector, their very existence.

Despite these extensive challenges, the Czech automotive industry overcame them in 2022 and achieved good results. After three years of declining production volumes, it has also once again recorded an increase in production of +9.4%. From January to December, a total of 1,249,281 road vehicles were produced in the Czech Republic. By segment, these included 1,217,787 passenger cars, 5,322 buses, 1,347 trucks, 1,624 motorcycles and 23,201 trailers and semitrailers. ŠKODA AUTO is the largest passenger car manufacturer, accounting for almost 56.9% of the total production volume, with 693,032 units produced at two Czech plants in Mladá Boleslav and Kvasiny. This is followed by Hyundai Motor Manufacturing Czech with 322,500 vehicles (26.5% share) produced at the Nošovice plant in the Moravian-Silesian Region and Toyota Motor Manufacturing Czech Republic in Kolín with 202,255 vehicles (16.6%). The largest bus manufacturers include IVECO Czech Republic (4,767 buses), SOR Libchavy (520 buses) and ŠKODA Electric (14 buses). The traditional TATRA brand produced 1,347 trucks at its Kopřivnice plant.

The automotive industry at a crossroads

Affected by the COVID-19 pandemic,its the resulting issues, the automotive industry has been in a profound operational crisis for almost two years. However, it is also facing the challenge of transformation triggered by technological progress and the pressure to decarbonise and make mobility green. One of the current challenges is the EU’s proposal on CO2 emission standards for new passenger cars and light commercial vehicles, which calls for new vehicles to be allowed to be sold in the EU with only zero CO2 emissions from 2035. Although the automotive industry is a major investor in CO2 reduction measures, we consider the target set by the proposal to be very ambitious and will be unconditionally dependent on the fulfilment of several conditions, such as the sufficient development of recharging and filling infrastructure, the availability of raw materiale or the real applicability of technology neutrality of powertrains.

A major challenge is the newly introduced Euro 7/VII proposal, which is completely counterproductive from the point of view of the car industry. Instead of improving emissions in transport, it effectively diverts the necessary resources from investment in battery and hydrogen vehicle technologies, and at the same time significantly reduces the range
of affordable models available to consumers. Moreover, it is not only the product itself that is undergoing changes, but also production in general and the entire automotive value chain. ESG (Environmental, Social and Corporate Governance) sustainability is bound to bring new opportunities to many industries, including the automotive sector. While posing certain threats, these new trends represent a chance for many companies to strengthen their position in supply chains and advance towards production with a higher value added.

The Automotive Industry Association has monitored and spurred discussion on the main trends and challenges for several years. Zero-emission mobility and production, digitalisation and automation, connectivity, the use of artificial intelligence and the development of technologies for autonomous vehicles are fundamental issues for the Czech econ- omy’s future. Collaboration with players from other industries – energy, IT and telecommunications – as well as active cooperation with the government and other stakeholders at the national and European level are also crucial for the Czech automotive industry’s success.

The Czech automotive industry has and will always have truly high aspirations. The industry is well prepared for both the actual production of future vehicles and the provision of comprehensive services across the sector. The Czech Republic has a chance to become an innovator and technological leader. 

Martin Jahn
President
Automotive Industry Association of the Czech Republic