To flourish Czech automotive industry needs to take advantage of electromobility trend, says economist

Published: 28.03.2022 Related countries:  Czech Republic Czech Republic

The sector is still in a crisis, with year-on-year production down by 11.4 percent.

The effects of the global coronavirus pandemic and the associated chip shortage resulted in a substantial fall in Czech automobile production in 2021 and freshly released data for January showed the worst year-on-year production fall in more than 10 years. According to Jan Bureš, the chief economist at Patria Finance, the next two to two years will likely see the Czech automobile sector fluctuate. What he sees as key for the future is whether local manufacturers manage to successfully react to new trends.

It looked like the Czech automobile production sector may be on the way to a successful recovery during the second quarter of last year. Production levels in the most important segment of Czech industry were significantly above those registered during the initial, full lockdown months of the pandemic in 2020 and almost reached prepandemic levels. However, the subsequent global shortage of semi-conductors wreaked havoc in the spring and the early months of autumn. Despite a subsequent rise in Novermber, the last month of the year saw yet another fall in production numbers, this time by nearly 16 percent.

The Czech Automotive Industry Association estimates that the global chip shortage led to around 300,000 cars that could have been sold on the market not being produced.

January data, which was published by the association on Thursday, suggest that the sector is still in a crisis, with year-on-year production down by 11.4 percent, the lowest it has been in January since 2010. However, the association states that aside from the chip shortage, this is also down to changes in production at some plants, such as Toyota’s Kolin plant preparing to switch from the Yaris model production to making the new Aygo X.
The association’s managing director, Zdeněk Petzl said that while he believes that the situation will gradually improve this year, subcontractor issues, Covid related worker shortages and the general rise of raw material prices remain a serious issue.

Jan Bureš, the chief economist at Patria Finance, told Czech Radio that he does not expect the car industry will get back to normal in the coming months.

It looks like the automotive sectors in Czechia and Germany are finishing orders that they were not able to complete at the end of 2021. Based on the information that is coming out of the sector for now, we can assume that the return to normal is slower than was originally anticipated. At least in the first half of this year we will likely see repeated ups and downs in automotive production rates.”

Even if the automobile sector does puck up in the second half of 2022, the economist expects that it will still fluctuate for the next one or two years.

Automobile manufacturing employs around 180,000 people in the Czech Republic. Aside from the iconic Volkswagen owned Škoda Auto, the country is also home to factories belonging to manufacturers such as Hyundai, Toyota and bus manufacturer IVECO. Just as in neighbouring Germany, the car industry plays a leading role in the Czech economy and that Jan Bureš believes that it is the dependence on this sector of economy that is largely responsible for both countries experiencing a slower recovery than expected.

Delivered by CzechTrade team Canada
Source: Radio Prague International