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Europe Car Industry To Rise with Soaring China Costs

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Published on : Jun 29, 2015

Companies involved in the car industry are bringing back production to Europe as the cost advantage with China weakens, which gives an opportunity for countries in Central Europe to attract investments, as commented by an executive at Volkswagen.

Though several years ago, the trend was to transfer massive automobile operations to Asia with the idea to save labor costs, the opposite is happening, as commented by managing director of Volkswagen Group.
In China, personnel costs is escalating and combined with long logistic routes and transport charges, clearly means production of auto parts is not economical in China anymore, as said by the managing director of Volkswagen who is also the chairman of Czech Automotive Industry Association.

In Europe, the car sector has been showing signs of growth in the last year and a half, with 5.7% increase in registration for new passenger car, as per the European Automobile Manufacturers’ Association. The changing trend is lucrative for Czech Republic that has capacity to augur its production capacity in the car industry.

Investors which includes Skoda Auto AS of Volkswagen, Nexen Tire Corp. of South Korea, and Hyundai Motor Co. have plans to invest more than US$1.3 billion in central European countries in the next five years.

In Central Europe, Czech Republic and its neighbor Slovakia have highest per capita car production capacity in the world and also both the post-communist nations in Europe are proposing incentives for foreign investors to support their economy large part of which depends on exports.

In Czech Republic, the Nexen factory which is in the plan is likely o create over 1,000 jobs and in Kvainy, a Skoda production unit will as much as 1,300 jobs as commented by the companies. Though the Czech Republic has the advantage of its central location and low labor costs, shortage of qualified personnel is an issue that the nation is grappling with.