Pandemic increased interest in Slovakia as a business destination

Drop in demand is a major challenge for German companies in Slovakia.

The autimotive industry is one of main pillars of the Slovak economy. The autimotive industry is one of main pillars of the Slovak economy. (Source: Courtesy of VW SK)

When the COVID-19 pandemic hit Slovakia in early March, it closed not only schools, borders and restaurants, but also brought car factories’ production lines, their suppliers and other factories to a standstill. After a weeks-long lockdown, most of them have resumed operation to a certain extent, but they will need months, if not years, to fully recover from the impacts of the coronavirus. Nevertheless, even the corona cloud has a silver lining; the pandemic may instigate a new wave of foreign investments.

Related articleGerman business in Slovakia goes beyond automotive Read more 

“From an increasing number of inquiries from Germany, we know that interest in Slovakia as a business destination has in fact increased,” Peter Kompalla, executive director at the German-Slovak Chamber of Commerce (AHK Slowakei), told The Slovak Spectator.

This has been confirmed by a recent survey it conducted in cooperation with Advantage Austria in late June, in which 30 percent of the companies surveyed noted that they put the shift of their supply chains closer to Slovakia and Europe on their agenda.

“If the new government continues its pro-European course and its efforts to improve the country’s competitiveness, we are optimistic that the success story of German-Slovak business relations will continue in the long run,” said Kompalla. “This partnership has been highly beneficial for both countries and there is untapped potential in many fields like Industry 4.0 or dual vocational training.”

Hard hit automotive

The automotive industry is one of the hardest hit sectors of the European industry. While industrial production decreased by 20.5 percent y/y in May in the EU, car production shrank to almost half. As the car industry is one of the most important sectors of Slovakia’s industry, it is obvious that its decline was significantly reflected in the total industrial production. As a consequence, Slovakia not only reported the biggest drop in industrial production in May, down 33.5 y/y, but its car production decreased by as much as 56.9 percent y/y, again the biggest decline within the EU.

The Slovak Automotive Industry Association (ZAP) estimates that car production in Slovakia shrank between 25-30 percent y/y during the first half of 2020. Given that the four carmakers in Slovakia produced more than 1.1 million cars in 2019, this means that they produced between 137,500-165,000 less vehicles.

New models for VW Slovakia

Bratislava-based Volkswagen Slovakia was the first out of four carmakers in Slovakia to suspend production due to the pandemic. It did so on March 17, citing not only health concerns but also a decline of the car market and risks related to supplying components as reasons behind its decision. It gradually resumed its production as of April 20.

But while the biggest and oldest carmaker in Slovakia would count all the impacts the coronavirus crisis would have on it only later, the crisis has also brought some good news for the plant.

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