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Since the early 2000s, Hyundai Motor has pursued a strategy of developing region-specific cars, which has profoundly influenced the brand’s sales in Europe.
Installing production capacity in Europe was essential to fulfil the demand and, seven years ago this month, the first i30 hatchback was made at Hyundai Motor Manufacturing Czech. Based in the industrial zone of Nosovice, the facility is one of the industry’s most productive, building more than 300,000 cars and 600,000 transmissions a year. It has quickly become a key location in Hyundai’s global manufacturing network.
Why did we select the Czech Republic as our production base? The country’s profile as an emerging automotive powerhouse is clear: carmaking dominates the country’s industrial landscape, employing more than 150,000 people and accounting for more than 20 per cent of total manufacturing output. The Czech Republic is now one of the world’s top 15 car producers by volume and per capita output stands at 107.5 vehicles per 1,000 people.
Furthermore, its supplier network is highly integrated into the European automotive value chain. Additionally, it is a stable and prosperous economy, with favourable labour laws and relatively low employment costs.
With these strengths already in place, a transparent system of government investment incentives that covered up to 15 per cent of eligible costs further encouraged Hyundai Motor to select the rural Moravian-Silesian location. The geographical benefits cannot be overlooked. The factory is situated almost in the centre of Europe, bordering Germany, Austria and Poland. Crucially, its fourth neighbour is home to Hyundai Mobis Slovakia, from where chassis modules and brake systems are delivered, while engines are sourced from nearby sister company Kia Motors Slovakia.
The labour force in the region is highly skilled, thanks to a long and successful industrial tradition and an education system with high standards.
But before the arrival of the plant, local employment opportunities were disappearing as heavy industry declined. Our €1.12bn investment in the plant has had a positive effect: more than 3,300 workers are now employed there, 97 per cent of whom are from the Moravian-Silesian region — with a further 7,000 jobs created in the surrounding area.
Our Czech operation has become one of the engines powering the nation’s economy. In setting up the factory, we made the largest foreign investment in the country, and the company is now ranked fifth for corporate income tax payment, and first among manufacturing companies. Further benefits come in the €1.6bn of orders placed each year, with more than 60 per cent of parts sourced within 40km.
Despite this corner of Europe becoming a strategically important manufacturing location for us, Hyundai’s European infrastructure growth began elsewhere. The European Technical Centre in Rüsselsheim, Germany, opened in 2003, and it is here that our cars for Europe are still designed, developed and tested. Capitalising on German pedigree in automotive engineering has far outweighed the logistical advantage of having research and development housed alongside production.
With this mix of specialist expertise based in relevant countries, our regionalisation approach now sees 90 per cent of cars sold in Europe designed, developed and manufactured in the region, contributing to our market share growth in recent years.
Our sales success helps to drive the Czech plant, which has been running at 100 per cent capacity even during the economic downturn.
Alongside high levels of operational performance, the factory has been recognised through several awards programmes, winning the 2010, 2011 and 2014 excellence award in the Czech National Awards for Quality; employer of the year 2013, 2014 and 2015; and, annually since 2011, the Czech Republic’s Automotive Industry Association company of the year accolade.
The writer is chief operating officer for Hyundai Motor Europe