Investment in new plants and expansion of existing facilities shows central Europe to be at the heart of vehicle manufacturers’ regional strategies
At first glance, vehicle production in central Europe – essentially the former communist bloc countries west of the Russian border – appears to centre on Volkswagen with its Skoda subsidiary in the Czech Republic, two LCVs plants in Poland and its huge SUV and small car plant in Bratislava, which is the biggest private sector operation in Slovakia. However, there is much more to the vehicle manufacturing sector in the region. Hyundai and Kia have established their EU manufacturing bases in the area, PSA and Renault (through Dacia) also have significant local operations and Jaguar Land Rover has chosen Slovakia as the location of its first factory (of its own) on mainland Europe; production will start there by the end of 2018 (third-party contract production at Magna Steyr in Austria had begun at end of 2017).
This review starts with Poland and proceeds in a broadly southerly direction, encompassing the Czech Republic, Slovakia, Hungary and Romania, examining the roles which each country plays in the varying strategies of the manufacturers in the region.
Positive investment in PolandFiat, Opel (PSA) and VW all have established manufacturing operations here. In addition, Daimler-Mercedes will shortly start production of 4-cylinder diesel and petrol engines in an all-new CO2 neutral plant which is powered solely by renewable energy sources. This factory is also said to be Mercedes’ most digitally advanced plant, fully compliant with Industry 4.0 protocols, with assembly lines fed by AGVs and components which have fully RFID tracking.
Meanwhile, the three car companies are at very different stages in their company and model lifecycles. The VW Poznan is the sole plant for the small Caddy van (produced at a rate of c150,000 a year) and also the overflow plant for the Transporter van (making around 30-35,000 a year, supplementing the main Transporter plant in Hanover); Poznan is about to receive investment of €400m to improve road logistics around the plant and general factory operations. Poznan and the all-new large van plant at Wrzesnia (which makes the Crafter at a rate of up to 80,000 a year for worldwide supply) are very much central and core to the company’s future. Meanwhile, the Fiat and Opel factories are in rather different positions.
The Fiat Tychy plant currently makes the 500 small car, and the Lancia Ypsilon – this is due to end within the next year as the Lancia brand is finally killed off. It is expected that the next Panda will be added to Tychy’s production line-up; it is also probable that a small Jeep, smaller than the Italian-made Renegade, will also be made in Tychy, making a return to 500,000 upa a realistic possibility. Such a volume would more than secure the plant’s future for the next model cycle and probably beyond.
With the PSA-Opel Gliwice plant the situation is much less clear. Unions have expressed concern over the factory’s future as production volumes of the Astra have fallen rapidly in recent times. The factory can make at least 150-180,000 units a year on a two-shift basis, and more with three shifts, but is unlikely to make even 120,000 vehicles this year. The future of Gliwice is very much bound up with that of Ellesmere Port in the UK – both factories make the Astra, a vehicle which does not justify two assembly plants. However, PSA has put most of its Opel-Vauxhall management effort into Spain and Germany so far, along with the UK van plant. Sorting out the futures of Ellesmere Port and Gliwice has not yet reached the top of Carlos Tavares’ to do list. Given the continued challenges with transforming Opel’s German factories into “PSA-compliant” operations, Gliwice may not make it to the top of the to do list until sometime next year.
High capacity in the Czech Republic Here production is dominated by Skoda which has two major vehicle plants, its main home plant at Mlada Boleslav and the newly-designated SUV centre of competence at Kvasiny. The latter plant has recently seen its capacity increase to 300,000 units a year, partly facilitated by the commissioning of an €8m fully automated warehouse with AGVs which can pick and carry components direct to the correct place on the assembly line. This plant makes the Skoda Kodiaq and the smaller Karoq with its SEAT version, the Ateca. Such has been the initial demand for the Karoq that not only is the model now also made at Mlada Boleslav but will also be made in VW’s plant in Osnabrück, Germany: here Karoq assembly will begin towards the end of 2018. This is the first Skoda model made in Germany and the first also to need three separate assembly lines in Europe to meet demand.
Meanwhile at Mlada Boleslav, significant investment is under way to prepare Skoda for electric vehicle production. Plug-in hybrid components are now in production for the Superb plug-in hybrid to be launched in 2019. This will be followed by the first full battery electric Skoda which will start production in 2020. Kvasiny is also being modernised to make the plant compatible with the requirements of Industry 4.0, part of a plan to make Skoda one of the most digitally-focused manufacturers in the region. In spite of this however, the company has a serious labour shortage – recruiting labour in the Czech Republic (as it is also in Slovakia) is a problem for VW as a whole. It would like to recruit another 3,000 people and thereby help boost Czech production by over 80,000 vehicles a year.
Recruiting and retaining labour in the country is a problem for most vehicle companies, not just Skoda. The Toyota-PSA plant at Kolin (TPCA) has had to award its employees a 16% wage rise over the last two years for example. Labour retention is a serious issue and TPCA cannot afford this to be an issue if it is to grow, for example by adding a small DS or even an Opel model to the production line-up at Kolin.
The final significant car plant in the Czech Republic is the Hyundai factory at Nosovice, a sister plant to the nearby Kia plant across the border at Zilina in Slovakia. The Hyundai plant makes the i30 compact car and ix35/Tucson SUV, a new version of which comes into production during H2/2018. This should see production in Nosovice hit 350,000 units a year when at full production rates.
JLR chooses Slovakia VW’s plant in Bratislava – where it makes both its largest SUVs and smallest car, the Up! – is reportedly Slovakia’s largest private sector operation and tax payer. Its importance to the Slovak economy is recognised by the government which is looking at loosening the rules surrounding getting work permits for around 2,000 Serbians and Ukrainians it would like to recruit.
The Bratislava plant has been extended to allow for full manufacture of the Porsche Cayenne (formerly this was shared between Bratislava and a German plant, along with some contract assembly at Osnabrück). There is a new body shop dedicated for the Cayenne for example.
The newest plant in Slovakia is the JLR factory at Nitra, where full scale production of the Discovery will begin in the fourth quarter of 2018, with all Discovery production moving there from the UK by the end of Q1/2019. The Nitra plant will have an initial capacity of 150,000 units a year, with the 50-60,000 Discoverys scheduled to be joined by the all-new Defender from 2019/2020. Whether the Discovery and Defender alone will actually fill the plant remains to be seen – for this to happen, the new Defender would have to sell significantly more than the 20-30,000 units a year achieved by the old model. The factory has been set up to make vehicles on the aluminium-intensive D7 (PLA) platform so other large SUVs which use this platform (e.g. Range Rover Velar) could also be made there. This may be required if post-Brexit trading arrangements made exporting fully-assembled vehicles from the UK too costly. Longer term the Nitra site could make 300,000 vehicles a year, but this would require a new assembly hall and significantly more investment by suppliers in the area. JLR has the land on the Nitra site to raise capacity to 300,000 in the future. Adding EV powertrain production is also a distinct possibility with press reports in 2017 having suggested that JLR had submitted planning permission applications for this very idea.
PSA, meanwhile, already has a 300,000 upa plant, at Trnava; here €165m has recently been invested for the new 208, boosting potential capacity to 360,000 upa. As well as assembling most of the 208s for Europe (c1/4 are made in France still) and all Citroën C3s, the plant will make a new three-cylinder EB petrol turbo engine from 2019 and is due to start making electric motors within the next year – these will be for electric versions of the 208/C3 and possibly other models made elsewhere in the PSA network.
The final car plant in Slovakia is the Kia factory in Zilina where over €300m has been invested in the last two years to prepare for the new cee’d compact car and Sportage SUVs. The Zilina plant now has a fully automated parts storage warehouse, over 300 robots along the assembly line, 2 huge transfer press lines, 2 body bucks which can make all the different versions of vehicles assembled in Zilina and a paint shop with a full 360° dip and turn tank. Robotics have also been extended to the assembly line, where the insertion of the front screen and wheel-nut tightening functions are fully automated.
Hungary sees EV production expansion For many years production here has centred on the major Audi engine plant and car assembly facility at Gyor. This makes the TT sports car and the Audi A3 sedan and cabrio. The A3 is gradually transferring back to Germany to be replaced by the Q3 SUV, itself transferring from Spain. Gyor’s most recent investment has been in electric motor production, for use in Audi e-tron models made in Germany and Belgium. The plant has seen investment new technology for copper wire winding and centre inserting – this enables the optimal amount of enamelled copper wire to be used in as compact a manner as possible. Rather than working on a traditional linear production line, the workers making the e-motors work on a modular system based around production islands which are supplied by AGVs. E-motor production began in July 2018 at a rate of 400 a day.The second longest established vehicle plant in Hungary is Suzuki’s which has a nominal capacity of 300,000 units a year, although this has not been used in recent years. The main model made here is the Vitara SUV which supplied worldwide, except for most Asian markets which are supplied by Japan. With production well below capacity and Suzuki failing to make significant inroads in Europe, many have questioned to the long-term future of the plant at Esztergom. However, Suzuki appears to be committed to the plant and has just begun a HUF5.3 billion programme to boost smart manufacturing in the factory (for example using digitally connected welding robots) and the all-round manufacturing efficiency of its local suppliers.
Mercedes is now opening a second facility at Kecskemet. The current facility makes the CLA sedan and shooting brake and B-class, with a capacity of 150,000 a year. The new facility will double this and will see the Hungarian factory make a wider range of models on the A-class platform, including the A-class itself which was added to the assembly line-up in Hungary this summer; other new models will include the GLB SUV and electric vehicles, currently known simply as EQ-A. Vehicle production should be begin in the new plant in 2019 or 2020. The factory is also designed to be fully flexible and should be capable of making both front wheel drive vehicles made on the A-class (MFA) platform and its future iterations, and rear wheel drive models, such as the C-class or derivatives, made on the MRA platform.
The new factory will also have a CO2 neutral energy supply and will operate digitally, with employees using tablets, smart phones and watches in their daily work. The factory has been laid out with lean principles in mind, minimising the distance parts and sub-assemblies must move from one stage to the next; parts are also moved by fully automated, driverless vehicles.
The country was given a boost in July 2018 when BMW confirmed it would build a factory at Debrecen. This will be BMW’s first all-new European plant since the Leipzig factory opened in 2000. In recent years, BMW has expanded significantly in China, the US and South Africa but with changes to global trading rules on the horizon and the move to EVs accelerating, the company appears to have decided it is best to have its next investment close to home. At this stage we do not know what vehicles will be made in Hungary, with BMW having said the factory will make 150,000 conventionally and electrically powered vehicles per year. Construction will start in 2019, with vehicle production expected from 2021.
Upgrades for plants in Romania There are two major car plants in Romania, Ford’s at Craiova and the Dacia plant at Pitesti. Dacia is operating at around 310-320,000 units a year on a three-shift basis, making the Logan, Logan MCV, Sandero, Duster and a small number of the Renault Symbol (a booted version of the Clio). Pressure on the plant’s capacity, due to strong continued demand for the Duster, has already led to some MCV assembly moving to Morocco. Pitesti has seen significant automation and digitalisation, to prepare the plant for Industry 4.0 and to reduce the dependence on increasingly difficult-to-recruit and retain labour, especially with unions having been agitating aggressively for wage hikes. The factory has, for example, 8 collaborative robots which help with especially heavy loads on the assembly line and 118 AGVs which deliver parts from the store to the assembly line. These are managed by factory-wide wi-fi.
Ford also has a 300,000 units a year plant in Romania, at Craiova. However, it has never made even half this potential volume, although this may happen in the near future. Currently the factory makes the B-segment EcoSport SUV and Ford has confirmed that a second, as yet unnamed new model will also be added to the plant within the next couple of years. Beyond confirming a second model, which will entail investment of around €200m, no details have been released and it is not known yet whether this will be a variant of Fiesta, and/or a full electric vehicle.
The EcoSport has achieved a 30% local Romanian content level, a source of some pride to the country’s automotive press and local Ford management, with Ford having brought 10 suppliers to the area. With monthly production of over 10,000 so far this year, the EcoSport is on course to do substantially better than the old model made in Craiova, the B-Max which rarely reached even 70,000 a year. EcoSport production is boosted by the fact that it does not just supply Europe but has 56 individual markets, including more than 20 non-European countries.
