Automotive industry in the Czech Republic

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Škoda factory in Mladá Boleslav

The automotive industry is one of the most important industries in the Czech Republic. It produces more than 20% of production volume, directly employs more than 120,000 people and at full capacity, produces more than 1.3 million passenger cars per year, which is a new car every 23 seconds (as of 2017).[1] In total, industry accounts for 35% of the Czech economy.[2][3]

The automotive industry plays a very significant role in Czech exports. In January 2010, machinery and transport equipment accounted for 54.3% of exports. In 2016, 1,351,124 motor vehicles were produced in the Czech Republic, which was 8.2% more year-on-year.[4][5]

The following car brands are currently manufactured in the Czech Republic: Škoda, Hyundai, Toyota, Praga (racing and sports cars), MW Motors (electric car).

Additionally, trucks (Tatra Trucks, Praga) as well as busses, trams, trains and subway trains (SOR Libchavy, Iveco Czech Republic, Skoda Transportation) are also produced in Czechia.

In 2006, the Czech Republic received the single largest foreign direct investment it had ever received before due to the automotive industry. This was a CZK 34.4 billion investment by Hyundai, a South Korean automaker, to establish Hyundai Motor Manufacturing Czech in Nošovice.[6][7]

Škoda, a Czech brand, was involved in the first privatization deals in Eastern Europe after being acquired by Volkswagen in 1991.[1] This brought historically significant amount of foreign investment to the Czech Republic. This investment by Volkswagen comes in separate deals (1991, 1994, 1995, 2000) to purchase increasingly larger percentage of share in the Škoda company until it became the sole owner on May 30, 2000.[8]

Major automotive parts suppliers such as Forvia (previously named Faurecia) are also producing in the Czech Republic.[9]

Early history

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The Prague watchmaker and mechanic Josef Božek, was the first to create a self-propelled carriage with a two-cylinder steam engine in what is now the Czech Republic. In 1815 he presented in public a self-propelled passenger steam carriage, the second steam car in the world after Frenchman Nicolas-Joseph Cugnot. Later, the Bohemian designer was engaged in steamships and rail transport, and also gained fame as a watchmaker.[10]

Nesselsdorfer Wagenbau-Fabriks-Gesellschaft (NW, or Nesselsdorfer Wagenbau), predecessor to Tatra, was established 1891,[11] based in what is now known as Kopřivnice, Moravia, Czech Republic. During establishment in 1891, the area was known as Nesselsdorf, and considered part of Austria-Hungary.

In 1897, Nesselsdorfer Wagenbau-Fabriks-Gesellschaft produced the Präsident (President) model, the first factory-produced automobile with a petrol engine ever made in the Czech lands.

In 1895, the currently defunct auto brand, Laurin Klement, is established in Mladá Boleslav. Like Nesselsdorfer Wagenbau-Fabriks-Gesellschaft, Laurin Klement did not originally produce automobiles. Lauren Klement originally produced bicycles.

Only in 1905, 10 years after Laurin Klement is founded, did Laurin Klement begin to produce automobiles, releasing the Laurin & Klement A (may also be seen referred to as L&K Voiturette A model) in 1905.[12]

History of Praga, car manufacturing company, dates back to 1907, beginning as a joint venture of First Bohemian-Moravian Machine Works (Czech: První česko-moravská továrna na stroje).

In 1909, the Praga brand was established. Praga started automobile production in the same year, 1909, with the Praga Charon.[13]

Later, Praga would merge with ČKD (Českomoravská Kolben Daněk) in 1927.[14]

After formation of Czechoslovakia, Nesselsdorfer Wagenbau-Fabriks-Gesellschaft adopted a Czech name, Kopřivnická vozovka a.s for the company. In 1919 the Tatra brand sign first appeared on the manufactured vehicles. The management of Tatra was also moved from Vienna to Prague at request of the Czechoslovak state authorities.[15]

Later, in 1925, Laurin Klement was acquired by Škoda Works, in 1925, and renamed, to Škoda Auto.[16]

Nazi regime's impact on Czech automobile industry

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The Nazis forcibly converted almost all major Czech automobile manufacturers to focus almost exclusively on military production. Nazi regime diverted resources from consumption to heavy industry and military production. While countries occupied by the Nazi regime retained nominal private ownership, heavy industries themselves were under heavy coercion with production quotas.[17][18]

Under the Nazi regime, Škoda Works was one such manufacturer ordered to focus on manufacturing weapons and other military parts, decreasing car production. This sharp decrease in car production can be seen in annual vehicle output:

1939: 7,052 cars produced by Škoda Works

1944: 683 cars produced by Škoda Works (and only 35 of this 683 were passenger cars) [19][20]

Škoda Works as well as many other manufacturers were controlled by the state-owned Reichswerke Hermann Göring during Nazi occupation.[2]

Being considered to be compliant with the Nazi regime by the Allied powers, the air forces of the US and the UK bombed Skoda Works manufacturing plants over multiple occasions.[20] At the time, they were mainly back to producing armaments, making them a significant target to destroy to prevent the Nazi regime from producing more military armaments.

Similarly to Skoda, Jawa, instead of producing its signature motorcycles and automobiles (Jawa briefly produced cars, with the first Jawa car produced in 1934), was ordered then to instead build bomb carriers, and engines for electric generators.[21]

Civilian car production was essentially halted except in very limited numbers (and even then usually for German officials).

Tatra and Volkswagen lawsuit

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Before Czechoslovakia's official Nazi occupation, Ferdinand Porsche (working for Volkswagen) designed the Volkswagen Beetle, which was heavily inspired from the designs of the Czech Tatra, especially the Tatra T97.

Tatra sued Volkswagen in 1938 for patent infringement.[22] However, after Germany invaded Czechoslovakia in 1939, Tatra effectively had to drop the lawsuit. Production of the Tatra T97 was even ordered to be stopped after the invasion.

The lawsuit between Tatra and Volkswagen was eventually renewed after World War II. In 1965, Volkswagen finally settled outside of court, paying out 3 million Deutsche Marks to Tatra.[23]

Communist regime's impact on Czech automobile industry

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From 1948 until 1989 Czechoslovakia was ruled by the Communist Party of Czechoslovakia (Czech: Komunistická strana Československa, KSČ), and therefore eventually transitioned to planned economy during this time, including the nationalization of automobile production.

Tatra would be designated as the "luxury brand", tasked with producing cars for the party officials.[23] Tatra had been ordered by decision of the Council of Mutual Economic Assistance (COMECON, or CMEA) to stop producing regular passenger cards and focus on trucks.[24]

In 1948, Škoda Auto was separated from the parent company, Škoda Works.

Škoda Auto would then become the state-supported manufacturer of affordable cars for the working population to meet domestic demand.[25] However, despite being only domestic source for passenger cars during communist rule, waiting lists to buy a Škoda as a native Czechoslovakian were sometimes three years long.[26]

A large number of passenger cars produced in Czechoslovakia were exported, instead of being sold domestically.

In the 1950s, about two-thirds of the annual production of passenger cars in Czechoslovakia were exported. This gradually decreased. In the late 1980s, approximately one-third of the annual production of passenger cars in Czechoslovakia were exported.[19]

Hard currency (required to buy Western technology and raw materials the communist-ruled countries could not produce) was considered more valuable to the communist regime than satisfying local consumers.[25]

In 1959, Škoda was allowed to export to western countries with the Škoda Felicia. However, Škoda Auto began to develop a poor foreign reputation.[20] Škoda would continue to maintain a poor reputation until the lifting of the iron curtain and acquisition by Volkswagen in 1991.[27]

Cold War political tension made marketing to western countries more difficult for Czechoslovak brands during Communist rule. They were also restricted from benefiting from automobile advancements occurring in non-communist countries.

The development of the Škoda Favorit in the 1980s led to financial difficulty for Škoda Auto. The Favorit was ambitious, involving collaborations with renowned Italian designer Bertone and foreign firms. The high costs of developing a modern, brand-new front-wheel-drive car strained Škoda's resources, pushing the company into heavy debt. The CSSR government implemented a tight deadline of only two and a half years.[28] Škoda was rushed to launch the Favorit before it was fully perfected, leading to initial quality problems that further hurt the company's finances.

Post communism and modern history

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Škoda was acquired by Volkswagen in 1991, shortly after the revolution of 1989 (Fall of Communism).[27] Volkswagen initially paid DM (Deutsche Mark) 620 million for a 31% share of Škoda, and would gradually purchase further control of Skoda in 1994, 1995, and eventually purchasing full control in 2000.

This turnaround success for Škoda after privatization and acquisition by Volkswagen can be seen in Škoda's annual production output of cars from 1991 to 2020:

1991: 172,000[29] cars produced by Škoda

2020: 1,004,800[29] cars produced by Škoda

Leading to Volkswagen acquisition of Škoda Auto was development of the Skoda Favorit, produced in 1987, before the fall of communism, which had high development costs and pushed company into debt relief. Investment was sought out by the Czechoslovakian government. Volkswagen acquired a 30 percent stake in Škoda Auto in exchange for investment. VW poured millions into modernizing Škoda's production lines, and technology.

Tatra passenger car production was terminated in 1997[30] and in 2001 the Czech government sold Tatra to SDC International (in cooperation with Terex).[31][24]

Toyota Peugeot Citroën Automobile arrives in city of Kolín, and begins to produce cars in 2005. Toyota marks investment into this project at an overall €1.3 billion and includes the research, development, and business start up costs into this figure. This was a 50:50 joint venture between Peugeot Société Anonyme (PSA Group), a currently defunct French automotive manufacturer, and Toyota, a Japanese automotive manufacturer.[32]

Peugeot branded cars were previously produced in the Czech Republic from 2005 to 2021 at Toyota Peugeot Citroën Automobile (TPCA) in Kolin. In 2021, Toyota obtained full ownership and renamed it to Toyota Motor Manufacturing Czech Republic (TMMCZ).[33]

Hyundai Motor Manufacturing Czech (HMMC) arrives in city of Nošovice on July 7, 2006, becoming the first Hyundai manufacturing plant established in Europe. This CZK 34.4 billion investment was also the largest foreign direct investment the Czech Republic had seen so far at the time, and was facilitated by state company CzechInvest.[6][34][35]

See also

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References

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