Prague - Hyundai on Monday 3 November started trial production in its new factory in Nošovice, north Moravia, boosting the overall Czech automotive output to a new record of more than 4,000 cars per day.
This is good news at a time when the global financial crisis is inflicting major injuries to the automotive industry all over the world. Experts say that, in the short run, the launch of the Korean carmaker will have a positive effect on the Czech economy.
"The Hyundai plant will serve as a cushion against the expected slowdown of the sector and the economy as a whole. GDP growth forecasts for the following years already take the factory into account. That means that, while the facility will not be able to stop the slowdown, without the factory the slowdown would be greater," Cyrrus analyst Karel Potměšil told Aktuálně.cz.
Since yesterday, the Czech Republic has three large carmakers: Škoda Auto, Hyundai, TPCA (Toyota, Peugeot, Citroën) and now also Hyundai. While boosting the overall output, the newcomer is also deepening the dependence of the domestic economy on its largest sector.
"In the long run," adds Potměšil, "Hyundai will increase the depndence of the Czech economy on the automotive industry. A new edition of today's crisis could then have more significant impact on the Czech economy."
"We are already beginning to feel the effects of this monoculture as the European economic climate is getting colder," says David Marek from Patria Finance.
Advantage of being new
Still, Czech carmakers have an advantage of being new. Potměšil says the current crisis is likely to affect mainly older, obsolete facilities rather than new investments.
A study by Ernst & Young says the hardest-hit will be the suppliers of car parts. "In the next two years we will probably witness an increase in the number of subcontractors in serious trouble," says Jiří Prokop from Ernst & Young.
The Nošovice plant plans to supply the European market with at least 18,000 Hyundai i30 passenger cars, including 500 destined for the Czech Republic.
The TPCA factory in Kolín benefits from producing small, cheap and economical cars. It has announced plans to invest CZK 142 million to increase the Kolín plant's production capacity to 340,000 cars.
Škoda Auto, on the other hand, is going to cut this year's output target by 13,000 cars due to the global crisis and declining demand. This means that the sector as a whole will stop about 20,000 car short of producing 1 million vehicles this year.
The Czech car industry employs more than 120,000 people. According to estimates made by the Automotive Industry Association, up to 10,000 could lose their jobs in the aftermath of the global crunch.
