Slovakia deeply identifies with its automotive tradition as the industry that has grown to become the most important sector and driving force of the economy. Today Slovakia is the leading car producer per capita in the world, owing to four world-class automotive companies (Big 4) opening their factories: Volkswagen Slovakia in Bratislava (since 1991), PSA Peugeot Citroën Slovakia in Trnava (since 2003), Kia Motors Slovakia in Žilina (since 2004) and Jaguar Land Rover in Nitra (since 2016).

Car manufacturing is the largest industry in Slovakia, constituting 13% of GDP, 54% of industrial production (compared to 33% in Hungary 31% in Czechia) and 33% of industrial exports. It is also one of the most integrated into global value chains, with the highest share of regional value chain trade in manufacturing and the second-highest share in the total economy. The Visegrad 4 countries represent the top four places in the EU-28.[I]

Among the Visegrad 4, Slovakia is easily the least diversified in terms of its production portfolio with only one plant producing engines and all four factories dedicated to passenger vehicles. Comparatively, Polish manufacturing focuses on buses and engines with two of its 16 plants producing passenger vehicles. Czechia mainly produces passenger cars and engines, but some companies are involved in buses and heavy-duty vehicles. Hungary also produces passenger cars, engines and buses.[II] Nonetheless, Slovakia is currently among the top European producers of electric cars (75,575) behind only Germany and France.

The AutoFocus Slovakia project

The AutoFocus Slovakia project This first phase final report provides a mostly qualitative assessment of Slovakia’ automotive industry from publicly available data sources and automotive industry studies and surveys. It serves as a foundation for the second phase of the project involving an industry consultation, scenario development and modelling analysis measuring the impact of the global transition from internal combustion engine (ICE) vehicles to electric vehicles (EVs) on Slovakia’s automotive industry in terms of economic output and labour market. The quantitative analysis will be carried out by Cambridge Econometrics.

This will test how well Slovakia can transition from ICE vehicles and parts to EV production and the e-mobility value chain by testing extremes and sensitivities representative of best and worst-case scenarios for a 2030 horizon, including informed assumptions about global and European EV sales shares, especially the evolution of major export markets.

The stakeholder consultation process will feed into the industry data collection and scenario development leading to modelled outcomes. This process will be supported by an informal coordination committee of representatives from Zväz automobilového priemyslu Slovenskej republiky (ZAP SR, Slovakia’s automotive association), the Slovak Electric Vehicle Association (SEVA), the Slovak Battery Alliance (SBaA), the German-Slovak Chamber of Commerce and the French-Slovak Chamber of Commerce, who share a common interest in supporting Slovakia’s automotive transformation into the e-mobility value chain to retain its relevance and competitiveness in 2030 and beyond.

The challenge

EVs will continue to gain market share on the back of global technology and climate policy megatrends. With some 70% fewer parts than ICE vehicles on top of manufacturing robotization and Industry 4.0, the transformation of the automotive industry will significantly impact the current workforce, creating distributional employment effects on regions and communities depending on the car component and willingness and ability of the company to adapt.

Slovakia will need to refocus and specialize in e-mobility in order to realize substitution potential for new automotive growth sub-sectors by 2030, primarily through the electric vehicle and battery production and the construction of charging stations. New and specific skills will be needed across the e-mobility value chain, specializing in areas such as high voltage operating systems, data network risk management, and AI, among others, requiring not only reskilling and upskilling where applicable but a wholesale reform of the university education system.

Conclusion

To remain globally competitive towards the end of this decade and beyond, eco-innovation should be a top priority for Slovakia’s automotive industry. As mentioned above, global carmakers are setting targets for carbon-neutral processes that trickle down to affiliated suppliers and the material used for their products. This trend to zero-carbon energy inputs should favour Slovakia’s low carbon intensity electricity system anchored by nuclear power, but the challenge extends to the decarbonization of industrial processes for inputs like rubber and steel.

Recommendations

  • Slovakia’s government needs to create favourable conditions for companies to go green, which is in its own interest to attract foreign investment that will secure economic growth and employment;
  • Businesses in Slovakia need to pressure the government to create the right regulatory framework
    for going green;
  • Car company headquarters need to work with their suppliers in Slovakia to help them adapt to new technologies and production processes through reskilling and upskilling;
  • The EU needs to prioritize the industrial transition in Slovakia and wider CEE to avoid leaving them behind with outdated technologies, supporting pilot projects and green tech R&D centres in cooperation with companies;
  • Reskilling and upskilling to match the labour demands of emerging e-mobility sub-sectors requires new education programmes and cross-cutting cooperation between public and private sectors and academia.

Read the full report in the documents section below.

[I] Stöllinger, R. et al., Global and Regional Value Chains: How Important, How Different? 2018, https://wiiw.ac.at/global-and-regio-nal-value-chainshow-important-how-different–dlp-4522.pdf
[II] https://www.researchgate.net/publication/334111704_Competitiveness_Outlook_of_the_Automotive_Industry_in_the_V4_Countries