Thomas White Global Investing
Czech Republic
August 29, 2008
A Postcard from the Czech Republic
Czech Republic: Czech Automotive Industry Shifts into High Gear

Czech Automotive Industry Shifts into High Gear The car industry contributes to more than 20% of total industrial production in the Czech Republic. Since 2000, the automotive sector has grown at an average of 4.5% annually, the second fastest after the electronics and optics industry.

On the banks of the Morávka River lies Nošovice – a sleepy, almost non-descript town tucked away in the Frýdek-Místek District of the Czech Republic. First impressions though are misleading. With a population of less than 1,000, Nošovice is home to one of the Czech Republic’s biggest automotive plants – South Korean giant, Hyundai’s $1 billion venture, set to start production in 2009. With a breathtaking array of lakes, parks, and endowed with natural abundance, Czech towns like this conceal a major, thriving automotive sector that forms the backbone of the country’s industry. The Czech Republic is one of the major automotive hubs in Europe, strategically placed in proximity to other countries in the region.

The Czech automotive industry has had a long history – the country’s most famous export – Škoda – began life as a bicycle manufacturer in 1895, and produced its first car, the “Voiturette A” in 1905. Since then it has grown to become one of the world’s oldest brands and an iconic symbol of the Czech Republic. More than 90% of automobile production in the Czech Republic is exported, most of it to the European Union region. The automotive sector accounts for 20% of all manufacturing output and 25% of Czech output. In addition, the domestic scene is booming, as passenger car sales in the Czech Republic recorded a 9.2% rise year-on-year for the first seven months of 2008. With more than 130,000 employees, and nearly half of the world’s top 50 component manufacturers, the engines of the Czech Republic’s growth lie here. The country also ranks as the fourth most attractive automotive R&D location worldwide.

From its historical cradle as a center of engineering excellence, the Czech Republic has lured manufacturers, and investors alike with its low-cost skilled labor, and developed infrastructure.

In the Central Bohemian region is another small town – Kolín, lying on the banks of the Elbe River. Once the scene of the fiercest battle of the Seven Years War in 1757, today, the city plays host to the modern $1.5 billion Toyota-Peugeot car plant. From Nošovice to Kolín, the Czech auto juggernaut has only just gathered steam.

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