June 4, 2007

Auto industry on the move to Europe, but more information needed, report says


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Toronto, Ontario – A report from PricewaterhouseCoopers (PwC) says that more and more automotive manufacturers and suppliers are making the move to Central and Eastern Europe, but there is more to choosing the right location than simply “moving to the right country”.

“Automotive companies that move to Central and Eastern Europe should think about location, location, location,” says Mark Walters, a PwC Tax Services Partner in the Automotive Industry Group. “They need to consider not just the country, but the right place in that country. There can be major, but less obvious, differences within each country that can make or break a move. These include the availability of skilled labour, planning regulations and quality of the utilities.”

According to PwC research, about US$6 billion worth of automotive production will be transferred to Central and Eastern Europe over the next five years, but understanding of the region is still quite limited.

The single biggest reason for moving is the potential for labour savings; wages are currently a fraction of those in the West, and the World Bank predicts that labour will remain cheaper in the new Central and Eastern European member states than in the EU15 for at least the next 20 years. But demand for skilled labour has already resulted in some major differentials in wage levels; the report says that the average gross monthly wage is now 25 per cent higher in Bratislava than in eastern Slovakia, and wages can differ by 43 per cent in areas of the Czech Republic. Physical infrastructure is also a concern, with few highways in Hungary, Poland and the Baltic States, and poor roads in Romania and Bulgaria. Many smaller provincial cities do not have international airports, and almost all railway rolling stock in the new member states of Central and Eastern Europe is more than twenty years old.

The report, Eastern Influx: Automotive Manufacturing in Central and Eastern Europe is available at PWC.com.

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