13 million jobs in Europe are at risk. The leaders of the automotive industry wrote to the EU, the sector in the Czech Republic has reached a new record.
A group of European subcontractors drafted a letter in support of their business from the European Union authorities. It points to the economic importance of the sector for the entire European economy. However, it fears pressure from foreign competition. Manufacturers therefore want to lobby for a mandatory percentage of components manufactured in the European Union. The automotive industry in the Czech economy is even more important than described by European manufacturers, however, the year 2024 was a record for domestic car manufacturers and car parts.
Adopting rules concerning the "minimum local content" regulations should help the European industry focused on manufacturing components for car manufacturers. This is essentially a copy of the regulations in the USA, which require at least 75 % local production in the final product.
What proportion of European components should be in the final product according to a letter from lobbyists, published by Politico, is not known. The document, however, significantly highlights the importance of this industrial sector for the entire twenty-seven of Europe.
13 million jobs at risk in Europe
"The automotive industry is a mass production sector that plays an important role in car manufacturing, national, and regional economies. It is not limited to car manufacturers only, but encompasses the entire industry. The network of suppliers and indirect contributors, who are responsible for 75% of the content value of the automotive industry. In Europe, this ecosystem of suppliers represents 8% of GDP and 13 million jobs, a similar impact is observed in other regions of the world,"
summarizes the importance of the entire sector.
Also, according to the signed companies, the influx of cheaper components from areas outside the European Union would threaten carbon footprint reduction policy, as the products would not be subject to the valid European criteria. Far from all the players in the sector, however, are in similar considerations as one.
The idea is primarily aimed against Chinese competition, whose attention could shift to Europe with rising tariffs in the US. Although the tariff increase for China announced by Donald Trump is not currently on the table in the US, lower prices for Chinese products can continue to influence the European market without further regulation.
However, some car manufacturers and their parts manufacturers have quite large investments in China, and similar legislation could potentially harm their production there. This is especially relevant for the emerging electric cars.
Czech automotive industry is thriving, for now
These are structurally simpler and many components manufactured for cars with combustion engines will be less sought after as the number of electric cars increases. But the largest automotive group in Europe, Volkswagen, is not doing too well in this segment. Today, Volkswagen is a symbol of German economic problems. Insufficient focus on development of e-mobility compared to American and Chinese manufacturers caused the car manufacturer to lose ground in this area and even closed some of its factories last year.
The conglomerate also includes the largest domestic car manufacturer, Škoda Auta from Mladá Boleslav. The domestic automotive sector is even more significant for the national economy than the position of the industrial sector referred to in the mentioned letter. It contributes up to 10% to Czech GDP and forms a quarter of Czech exports. However, 2024 was a record year for Czech manufacturers.
"Despite worsening conditions, whether it is unstable supply chains, the negative impact of geopolitical conflicts, slow economic development or persistently high energy prices, the automotive industry managed to achieve extraordinary results in 2024. Overall production of passenger cars in the Czech Republic increased by 3.9% year-on-year to a historically record volume of 1,452,881 produced passenger vehicles. These numbers are clear evidence that the Czech automotive industry remains a key pillar of the domestic and European economy,"
Commenting on the record year 2024 Martin Jahn, the president of the Association of Automobile Industry.
The survival of companies in the automotive industry will depend on the ability to adapt to technological development of cars. Extending the production of chips at the Onsemi branch in Rožnov pod Radhoštěm, agreed upon last year by the Czech government, can also help. Also on the right track is, for example, a significant player in the industry with factories in Rakovník, Žebrák, Humpolec, and Podbořany, Valeo. The French company also has a development center in Prague. It focuses on sensors and assistance elements of cars, of which there are more and more in them. But Valeo is also one of the signatories of a lobbying letter calling for the protection of the market against Chinese imports, following the model of the USA.
Sources: author's article, politico.eu, ft.com, autosap.cz, ekonom.cz,
