2nd ICAI 2022

International Conference on Automotive Industry 2022

Mladá Boleslav, Czech Republic

suppliers (though have quite many foreign-owned suppliers operating in Hungary) and the overwhelming majority of parts and components comes from imports. In Czechia, there is wide range of local automotive suppliers covering both multinationals (usually occupying tiers 0.5-2) and domestically owned firms (in most cases tier 2 or 3 suppliers). Nonetheless, foreign owned suppliers typically source most of their inputs from abroad, with a maximum range of 500 to 800 km. This is related to corporate strategies as well as the fact that local firms are often not capable to supply inputs in required amount and/or quality. Despite of that, there is higher embeddedness of local firms (both domestic and foreign owned) in Czechia compared to Hungary. Our interviews also reinforced the dominance of forward links in Hungary. Indeed, our expert interviews showed that Hungary is relatively more specialised in parts and components production, in spite of the fact that three carmakers are present in the country with assembling. This is underlined by the fact that the time period covered by the input-output analysis ends in 2014, when the production of Mercedes was not full fledged yet. On the other hand, important producers of parts and components from Germany (e.g. Knorr-Bremse, Robert Bosch, Continental, Harman Becker), from other European and non-European countries (e.g. the Austrian AVL, the Canadian Linamar, the French Michelin or Valeo, the Indian SMR, the Japanese Denso, the Korean Hankook, the US Jabil or Lear) are determining players in the Hungarian automotive industry. They not only supply the local subsidiaries of carmaking multinationals, but also export intensively to other countries. In Czechia, the operations of three OEMs (Škoda, Toyota and Hyundai) and the fact that Czechia produces twice as many cars as Hungary also means lower complex forward linkages. Even so, interviewed automotive suppliers export the majority of their products, on average almost 90% of their production. The data showed the differences in the length of production in the two countries. Our interviews reinforced, that Hungary is highly specialised in certain, mainly production related activities and very limited is the service value added content. For example, R&D activities of both independent centres (foreign-owned) and production-related, though slowly growing, is still quite limited. In Czechia, there are several large automotive R&D units (e.g. Valeo, Bosch), and there are also R&D in Czech companies, though this is limited to just a few of them. All interviewed companies confirm increased R&D expenditure and moving up to more sophisticated countries. According to respondents, Czechia is now termed the best-cost country rather than a low-cost country. Therefore, some of the low-value added activities have already been relocated. The dominant input sourcing from Germany by the Hungarian automotive industry is also indicated by the interviews. This is on one hand due to the establishment and operation of the Mercedes factors, which concentrates on assembling activities. Furthermore, as we mentioned above, even the overwhelming majority of local links are to foreign (in many cases German) owned subsidiaries. The same applies to Czechia, where most inputs come from Germany or localized branches of German multinationals. This is not the case for Hyundai, though, where the inputs either stem from co-located Hyundai suppliers (e.g. Mobis, Transys), other Huyndai suppliers located in neighbouring countries (Slovakia, Poland) or from Asia, particularly Korea.

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