Germany is struggling with the onset of electromobility. Will the Czech Republic also pay for it?

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According to an analysis by the British newspaper Financial Times, the German automobile industry has serious problems with the transition to electromobility.

According to Andreas Volf, head of the subcontractor company Vitesco Technologies, one of the problems is the fact that the German automotive industry and its investors did not believe in the transition to electromobility for a long time. Other players, mostly from Asia, gained the lead.

Problem for subcontractors

At the moment, a number of German subcontractors have a serious problem because they have to rapidly develop new product lines for electromobility. At the same time, their margins on products for classic internal combustion engines (heading into decline) are rapidly falling.

The result is not happy at all – the number of first-level subcontractors in Germany has fallen sharply over the past three years. Out of less than 700 thousand, by almost 85 thousand (that is, by more than 10%).

And this necessarily also affected employment, which fell by more than 30,000 at subcontractors and by more than 60,000 workers in the entire automotive industry in Germany (6% of the total number of employees).


GRAPH: Development of the number of employees in the German car industry
Over the past 20 years, in thousands workers.

Source: KBC/Eurostat; DESTATIS


What is the situation in the Czech Republic, which is logically directly connected to a number of German chains?

The Czech Republic is still going full steam ahead

At first glance, the situation in the Czech Republic is surprisingly good. Automotive does not belong to the brakes of the Czech economy, but on the contrary to the functional parts of our industry.

Compared to 2017 (when it started to decline in Germany), production is almost 20% higher. In Germany, on the other hand, it is almost 20% lower than in 2017.


GRAPH: Comparison of the development of automotive production in selected countries
From 2016 to the present, in points (index 2019 = 100).

Source: KBC/Eurostat


It is also largely a consequence of the problems of the German car industry already in the pre-Covid era, as a result of the Dieselgate affair. However, even in the post-covid era, the “comeback” of the Czech automotive industry is much more impressive, and relatively decent new orders point to a good year 2024 so far.

In addition, a look at the number of employees shows that Czech automotive (both final producers and subcontractors) reduced the number of workers during the pandemic roughly as significantly as neighboring Germany (probably especially agency employees).

This shows that productivity (and probably also unit labor costs) in the Czech car industry has improved considerably compared to the German one.


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Short-sighted joy

The problem is that this joy can turn out to be very short-sighted. The Czech car industry has been reviving in the last two years mainly thanks to cars with internal combustion engines.

And their decline in the following decade is practically a done deal. Even Czech producers/subcontractors have to fight for their place in the sun in new production chains.

They are in the same boat with Germany on the global stage in this fight. The Financial Times analysis is thus a warning for us as well.


The article is in Czech

Tags: Germany struggling onset electromobility Czech Republic pay

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