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.

In 2022, the global semiconductor shortage, continuing 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 affect the closely interconnected global industry. These were compounded by the extreme increase in energy prices and high inflation, which threatened the competitiveness and sustainability of manufacturing in the Czech Republic and, for a significant part of the supply sector, their very existence.

Similarly, to several previous years, 2023 was not an easy year for the domestic car industry. The entire supply chain faced several challenges in the form of the impact of the ongoing Ukrainian-Russian war and the newly emerging Israeli-Palestinian conflict. Year-on-year volatility in production, although lower, continued to be particularly pronounced in the spring and summer months, when unpredictable natural events resulted in production curtailments at some end producers. All of this, of course, had an impact on companies in the supply chain. The sector continued to face high prices for some inputs, including energy. A separate chapter is the still unsatisfactory situation on the domestic labour market in the form of staff shortages in both highly specialised and operator positions.

However, despite these challenges, the Czech car industry has demonstrated its resilience and experience gained over the past years and has achieved very good results in 2023. The 14% increase in production and the total number of 1,423,979 road vehicles produced is thus a clear approach to pre-crisis production figures. By segment, the Czech Republic produced 1,397,816 passenger cars, 5,253 buses, 1,432 trucks, 755 motorcycles and 18,723 trailers. Škoda Auto is the largest producer of passenger cars, accounting for almost 62 % of the total production volume and producing 864,889 units at its two Czech plants in Mladá Boleslav and Kvasiny. This is followed by Hyundai Motor Manufacturing Czech with 340,500 vehicles (24% share) produced at its plant in Nošovice in the Moravian-Silesian Region and Toyota Motor Manufacturing Czech Republic in Kolín with 192,427 vehicles (14%). The largest bus manufacturers are IVECO Czech Republic (4,741 buses) and SOR Libchavy (492 buses). The traditional TATRA brand produced 1,432 trucks at its Kopřivnice plant. Last but not least, the group of final manufacturers also includes producers of small and large trailers, which together produced 18,723 trailers and semi-trailers.

The automotive industry at a crossroads

The automotive industry, affected by several of the above-mentioned problems, has been in an operational crisis for almost 4 years, from which, thanks to its resilience and accumulated experience, it has found a way out in 2023. At the same time, however, it faces the challenge of transformation brought about by technological progress, pressure to decarbonise and green mobility.

One of the current challenges is the EU's proposal on CO2 emission standards for new passenger cars and light commercial vehicles, which requires that from 2035 new vehicles can only be sold in the EU with zero CO2 emissions. Although the automotive industry is a major investor in measures to reduce CO2 emissions, 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 refuelling infrastructure, the availability of raw materials or the real applicability of technological neutrality for powertrains.

Another major challenge is the new form of the Euro 7/VII emission norm, which, although noticeably more realistic than the original proposal, remains completely counterproductive for the automotive industry. Instead of improving transport emissions, it effectively diverts much-needed resources away from investment in battery and hydrogen vehicle technology.

Moreover, it is not only the product itself that is changing, but also production in general and the entire automotive value chain. ESG (Environmental, Social and Corporate Governance) sustainability will certainly bring new opportunities for many industries, including the automotive industry. While these new trends pose some threats, they represent an opportunity for many companies to strengthen their position in supply chains and move towards higher value-added production.

The Automotive Industry Association has been monitoring and stimulating discussion on the main trends and challenges for several years. Emission-free mobility and production, digitalisation and automation, connectivity, the use of artificial intelligence and the development of technologies for autonomous vehicles are crucial topics for the future of the Czech economy. Cooperation with players from other sectors - energy, IT and telecommunications - and active collaboration with the government and other stakeholders at national and European level are also crucial for the success of the Czech automotive industry.

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