Slovakia is not the only central European country facing such challenges. Fellow European Union members the Czech Republic, home to Volkswagen’s Skoda brand, and Hungary, where both BMW and Daimler have plants, rely heavily on investment from foreign automakers.
A brewing global trade war is a particular concern for such countries, given their high reliance on foreign trade, European Central Bank President Mario Draghi said earlier this month.
Deloitte Chief Economist David Marek has said a 25 percent tariff on U.S. imports of cars from Europe would cut the revenue of the Czech auto industry by 12 billion crowns ($532 million) a year.
Poland, the region’s biggest economy, is betting on electric vehicles, setting a target of having 1 million such cars and vans on the road by 2025 and highlighting a battle for investment as the auto industry embraces new technologies.
At the same time, faltering global growth has led some automakers to put expansion plans on hold, such as Daimler’s announcement in May to postpone an increase in capacity at its Kecskemet compact-car plant in Hungary.
“It has been taken for granted that plants like Bratislava would just carry on and produce the next generation model,” Carol Thomas, an auto analyst at LMC Automotive, said. “But we can’t just assume that anymore. Plants will not only have to fight for new models, they will also face greater competition to retain new generations of models they already produce.”
So far this year, Volkswagen has scaled back production lines in Bratislava and returned workers borrowed from Audi’s plant in Hungary in 2016.
“This is the key year that will decide the future of the Slovak factory,” VW Slovak CEO Oliver Grunberg said, adding a decision was expected by the end of the year. “Improvements in Slovakia’s business environment would help increase attractiveness of Bratislava’s plant,” he said.