Europe: VW executive says automakers returning from China image

Carmakers are coming back to Europe and increasing production on the Old Continent as China, the world’s largest single auto market, starts lowering the cost advantage as the economy weakens.

The weakness seen in China would prove a great opportunity for central European countries to attract new investments even as just a few years back the forecasts were for a “massive transfer” of automobile production towards Asia to lower cost expenses. “We are seeing a rather opposite process at present,” commented Martin Jahn, managing director of VW Group Fleet International. “Personnel costs in China are growing and that, in combination with long logistic routes and transport costs, means production of components in China isn’t that advantageous anymore,” said the manager, who is also the chairman of the Czech Automotive Industry Association. The European auto sector has been showing signs it was ready to return to growth during the past eighteen months, with auto industry association ACEA seeing 2014 sales figures up 5.7 percent.

The growth is an ample opportunity for countries such as the Czech Republic, home of the Skoda auto brand, a wholly-owned subsidiary of Volkswagen Ag, the largest European automaker and the second biggest in the world. The central European’s auto industry still has room to grow, with increases coming from VW’s Skoda unit, as well as other automakers or parts manufacturers. For example, South Korea’s Nexen Tire Corp. and Hyundai Motor will spend around 31 billion crowns ($1.3 billion) over the next half decade to expand production in the country. Both the Czech Republic and neighboring Slovakia are some of the world’s largest auto producers per capita and the two ex-communist European Union members are drawing foreign investors through increased incentives and subsidies.

Via Automotive News Europe