Chinese Labor Costs On The Rise, May Shift More Production To Czech Republic

Earlier this week, Volkswagen Group Fleet International Managing Director Martin Jahn indicated that the rising costs of labor in China, in-conjunction with logistical costs, will likely prompt Volkswagen and others to relocate plenty of production away from the Asian country, and back to Europe.

That’s the latest according to Bloomberg, which reports that the production-shift could pose an opportunity for the Czech Republic, among other – especially former-Soviet – countries. Bloomberg reports that Volkswagen’s Škoda brand, along with South Korean Nexen Tire Corp. and Hyundai Motor, have already made plans to invest substantially in increasing production in the Czech Republic.

Together, the three companies will spend an estimated $1.3 billion there over the next 5 years. Nexen’s expansion in the Czech Republic could create over 1,000 jobs, while Škoda’s broader operations there could lead to as many as 1,300.

Beside serving as Managing Director for Volkswagen Group Fleet International, Martin Jahn also chairs the Czech Republic Automotive Industry Association. He said that while it had been forecast years prior that China would overwhelmingly be the recipient of a massive movement of production, that trend is slowing:

“Personnel costs in China are growing and that, in combination with long logistic routes and transport costs, means production of components in China isn’t that advantageous anymore,” he told Bloomberg. He did concede that while the Czech Republic offers an eligible locale for future production relocation, qualified workers are somewhat scarce and ever-depleting in the Central-European country.

Aaron Birch is an automotive enthusiast and writer/filmmaker from Detroit, MI. As a rule, he only buys cars older than himself.

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