Car industry companies are returning some production to Europe from China as its cost advantage weakens, providing an opportunity for central European nations to attract investments, a Volkswagen AG executive said.
While several years ago expectations were for a “massive transfer” of automobile operations to Asia to save on labor expenditures, “we are seeing a rather opposite process at present,” Martin Jahn, managing director of Volkswagen Group Fleet International, said in an e-mailed response to Bloomberg News questions.
“Personnel costs in China are growing and that, in combination with long logistic routes and transport costs, means production of components in China isn’t that advantageous anymore,” said Jahn, who also chairs the Czech Automotive Industry Association.
Europe’s car sector has been showing signs of growth in the past one and a half years, with new passenger car registrations last year up 5.7 percent, according to the European Automobile Manufacturers’ Association.
The trend is an opportunity for countries like the Czech Republic, which has room to continue increasing production in its car industry, Jahn said.
Investors including Volkswagen’s unit Skoda Auto AS as well as South Korea’s Nexen Tire Corp and Hyundai Motor Co plan to spend more than a combined 31 billion koruny (US$1.3 billion) in the next five years in the Czech Republic.
The Czech Republic and Slovakia are among the world’s biggest car producers per capita, and the two countries offer incentives to foreign investors as large parts of their economies rely on exports.
In the Czech Republic, the planned Nexen factory may create more than 1,000 jobs and a Skoda production plant in Kvasiny will create as many as 1,300 jobs, the companies have said.
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