Slovakia’s car industry faces Green Deal fears

Author: Joshua Posaner

Source: politico.eu, November 24, 2020, 4:01am (section Hot Topics)

The world’s leading car producer braces for the electric vehicle revolution.

Ladislav Kamenický admitted he was scared. It was October 2019, and the Slovak finance minister was at a small meeting of politicos and think-tankers near a crystalline lake high up in the Tatra Mountains.

The topic that had him nervously running through his country’s economic profile was the car industry — Slovakia’s major manufacturing base and driver of employment. “The automotive industry is in transformation, and I see in the future a completely different landscape,” Kamenický told POLITICO at the time.

The danger to Slovakia comes from the accelerating shift to electric cars — a technology that will be needed if the EU is to slash greenhouse gas emissions from transport and hit its Green Deal target of becoming climate-neutral by 2050.

That’s because Slovakia made a winning bet on combustion-engine cars. It’s the world’s largest carmaking country per capita, with the sector accounting for 13 percent of GDP and employing 275,000 people. The industry encompasses everything from small-parts suppliers to enormous factories owned by Volkswagen, Jaguar Land Rover, Kia and Peugeot churning out finished models. The industry has driven the transformation of the country of 5.4 million from the rust belt of Czechoslovakia to a modern EU economy.

But electric vehicles are a completely new industry — and the worry in Slovakia is that there will be fewer factory jobs for making EVs than to assemble conventional cars, and those might not be located in Central Europe. Battery-powered cars need five to 10 times fewer parts than existing models, Kamenický said, “I’m scared of what will be if the automotive industry will not be in Slovakia,” he said.

The country’s short-term prospects remain positive. After suspending plans to relocate production to Turkey, Volkswagen agreed this month to move assembly of Passat and Škoda Superb models to its plant in Bratislava. That will create new jobs, but further anchors the production of internal combustion engine vehicles in Slovakia.

The EU’s drive to phase out conventional cars means there will have to be a change. Brussels is mandating a slash of 90 percent in transport emissions by 2050, so only zero-emissions cars will make the grade. Slovakia makes only a few of those.

Labor unions are fretting over what’s to come. “If four more foreign carmakers come to Slovakia today, our standard of living will not fundamentally improve, we will still be just a production workshop,” said Peter Mrázik, a trade union official at the Jaguar Land Rover plant near Nitra in western Slovakia.

He says nine out of every 10 future jobs will require digital skills, putting conventional assembly line workers on the back foot. “Increasingly, we are lagging behind in digitization, artificial intelligence, augmented reality, bioengineering, the green economy, advanced services and infrastructure,” said Mrázik. “Slovakia is one of the most endangered countries.“

The solution, according to the Slovak auto industry’s biggest cheerleader in Brussels, is creating a regional supply chain to keep the country competitive in electromobility. “Slovak car plants are among the most modem in the world,” said Maroš Šefčovič, a Commission vice president who has spearheaded the EU’s push to fund its own battery cell industry.

He says Slovakia can, with targeted EU funding, be at the center of a new regional supply chain for battery electric vehicles in the future. “There are solid reserves of lithium in the Czech Republic,” Šefčovič said. “Slovakia should build a gigafactory and research and development center, and then there is discussion with Hungary concerning a [battery] recycling plant.” He pointed to InoBat, which wants to build a battery cell plant in Slovakia, and has secured funding from Czech utility CEZ while lodging an application for more financing with the European Investment Bank.

There are already other companies springing up in Slovakia to support clean mobility. “We know that our small country is really known for automotive,” said Juraj Ulehla, a former investment banker who co-founded Voltia, which converts and leases electric vans, and Greenway, which is rolling out fast charge points across Central Europe. “On the other hand, such a dependency creates a potential problem for the future if the switch to electric is not done.”

“It is not only a problem for Slovakia, but here it is maybe more visible,” he said. “The revolution has already started.”

Nette Nöstlinger contributed reporting.