Pre-flight checks: the AeroMobil 3 on display in a hangar in Nitra
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In the 1990s, central and eastern Europe carmaking was known for the cheap and cheerful Skoda Favorits, Fiat Seicentos and the Daewoo Tico. But two decades on and the region is starting to show a more upmarket aspect.

Poland makes the restyled Fiat 500, a chic city car. Hungary makes Audi’s sleek TT roadster and the new Mercedes-Benz CLA estate.

The Czech Republic still has Skoda, but the brand is turning out respected upmarket models, such as the Superb.

And Slovakia, which made relatively few cars in the mid-1990s, now makes €70,000-plus Porsche Cayennes and bodies for the upcoming Bentley Bentayga sport utility vehicle.

“In 1990, these countries were supplying just their own markets,” says Carol Thomas, an analyst at LMC Automotive, a consultancy. “Now, they’ve got plants that can compete [globally].”

The region’s rise has been rapid. In 20 years, annual production by Poland, Hungary, Slovakia and the Czech Republic — known as the Visegrad Four — has gone from just over 500,000 cars to almost 3m in 2014. More than 90 per cent are exported beyond the region, says Ms Thomas.

Although Dacia, the Renault-owned brand that has become Europe’s low-cost marque of choice, has brought success to neighbouring Romania, the region’s reputation for making upmarket cars is likely only to increase. The latest development is that Jaguar Land Rover, the upmarket British carmaker, has signed a letter of intent to build a plant in Slovakia. The 300,000 units the factory could produce are likely to include the next-generation Land Rover Defender, as well as the Discovery Sport.

Announcing the expansion, Ralf Speth, JLR chief executive, highlighted one factor: the region’s “established premium automotive industry”.

Carmakers of all stripes have been lured to central and eastern Europe. Asian brands, such as Hyundai and Kia, like its proximity to western Europe. Low labour costs, improving infrastructure and high productivity, at least in Slovakia, have attracted established European names such as Volkswagen, Peugeot Citroën and Opel, owned by General Motors. But it is the region’s suppliers, skilled workers and network of technical universities that have given confidence to upmarket manufacturers.

“The region already had a pool of talent . . . just waiting to be utilised,” says Ms Thomas. “The standard of technical education is really outstanding.”

Government aid has also handed an incentive to manufacturers looking to build state of the art factories to produce modern, lightweight cars, and played a part in the JLR decision to choose Nitra, the Slovakian city, as a production base.

JLR will join another luxury-market company in Nitra. AeroMobil is developing what could be the first commercial flying car. People involved in the project, and the Slovakian government, hope the vehicle will highlight the region’s advanced engineering capabilities, although it lacks high-level auto research and development functions. The region remains largely a production base rather than a place to design cars.

But AeroMobil offers a new perspective on the region. “Making something that’s both a great car and a great aircraft, that takes an enormous amount of creativity,” says Antony Sheriff, former McLaren Automotive chief executive and an adviser to AeroMobil.

The company, which has 25 staff but is growing, is in the process of building a vehicle that is part sports car, part light aircraft. It benefits from having both Slovak automotive suppliers and ultralight aircraft makers, such as Shark Aero, nearby.

Of the region Mr Sheriff says: “When you put all the fundamentals together, it’s a really good place to build interesting and unusual cars.” However, analysts say two problems could limit further advances. Most immediate is the fallout from the VW emissions scandal, which disproportionately affects the Visegrad Four.

The German company, which admitted in September to cheating on US emissions tests, accounts for about a third of the region’s automotive production. More than 60 per cent of Slovakian car production since 1991 has been for VW, according to PA Consulting.

There have been warnings from sector analysts at the likes of Bank of America, and some in the industry, that the scandal could hit GDP in several central and eastern European countries.

Another problem is competition for skills. The automotive industry needs electronics and IT knowledge but technology companies SAP and Hewlett-Packard have bases in Slovakia. “They just take all the IT guys from the universities,” says Daniel Hirsch, manufacturing expert at PA and former chief operating officer at VW Slovakia.

Consumer electronics companies such as Foxconn and Samsung also have factories in the country. “The market for engineers is very stretched at the moment,” Mr Hirsch says.

Copyright The Financial Times Limited 2018. All rights reserved.