Polish automotive industry at a turning point

Luc Williams

The automotive sector is one of the most important branches of the Polish economy.. About 200 thousand employees work in production alone, which constitutes over 7 percent of people employed in the industry.. Polish Automotive Industry Association indicates that almost twice as much employment can be found in the food industry (379 thousand people), as well as in the production of metal products (298 thousand people). It is also worth emphasizing that the automotive sector accounted for 8.2 percent of the value of production sold in industry in 2022. In the first half of 2023 alone, the revenues of companies in this sector exceeded the threshold of PLN 121 billion. The value of exports in this period reached EUR 26 billion, of which 1/4 were lithium-ion batteries.

Automotive industry in Poland

PZPM data show that in 2022 the value of exports of broadly understood automotive products from Poland increased to EUR 38.4 billion, or 14.3% compared to the previous year. This was more than in 2019, when the value of automotive products sold abroad reached EUR 36.5 billion.

The most important destination for Polish automotive exports remains Germany, where in 2022 vehicles, trailers, semi-trailers and their components, as well as parts worth almost EUR 12.3 billion were sent, after an increase of almost one fifth (18.2% y/y). This country is the largest recipient of both finished vehicles and components, with the latter category being more than twice as large in value. Among the key markets, the value of automotive product exports to France (27.8% y/y), the Netherlands (24.3% y/y) and the Czech Republic (23.0% y/y) also increased most clearly in 2022,” reports PZPM.

When it comes to attracting foreign direct investment in Central and Eastern Europe, Poland is at the forefront of the region. In 2021, €25 billion flowed into Poland. In contrast, in 2020, it was €13.3 billion. Since 2019, i.e. before the pandemic, the inflow of investment has more than doubled.

As for production itself, in 2022 it increased by 9.6% compared to 2021. 420.1 thousand passenger cars and light commercial vehicles left all factories.

The largest factory in Poland is Volkswagen Poznańand its share in domestic car production reached 53.8%. Two plants belonging to Volkswagen Poznań produced a total of 226,000 passenger cars and light commercial vehicles (19.8% more than a year earlier).

Stellantis Passenger Car Factory in Tychy produced 167.1 thousand cars. The company ended the production of passenger cars in the Gliwice factory in 2021. However, a completely new plant for the production of large delivery vehicles was built nearby.

Changes in the industry

Jakub Faryś, President of the Polish Automotive Industry Association, emphasises that the first significant change in the industry is the challenge of transitioning to low and zero emissions.

“This will mean that our competences, which are currently at a high level, mainly in the field of classic motorization, will have to change. This in turn means the need to educate staff in the direction of new types of drives, as well as changes that will cause the production of low- and zero-emission vehicles, as well as parts and components for them, to appear in Poland. If today half of the Polish automotive industry is the production of parts intended for combustion cars, then the transformation will largely concern companies where change will often be downright impossible to implement. Another challenge is for Poland to maintain its position on the automotive map of Europe, which will depend on the availability of cheap and green energy,” said the president.

Jakub Faryś also draws attention to the growing competition from Chinese producers. They are already a challenge for corporations from all over Europe.

“The companies there have great competence in the area of ​​electric and combustion vehicles. The products they offer are absolutely acceptable to European customers today, and much cheaper. If European manufacturers want to continue to be present on the market, they must adapt to this. Anyone who disregards Asian competition will make a mistake,” Faryś concluded.

Electric cars = fewer components = fewer jobs

The parts and components industry plays a key role in the structure of the Polish automotive sector. In 2022, exports of such products reached EUR 27.4 billion. The Association of Distributors and Manufacturers of Automotive Parts emphasizes that the sector is currently undergoing a transformation, which is taking place in very unfavorable conditions. Europe must create the right economic situation to ensure the continued competitiveness of the domestic automotive industry. The mood in the industry would be better if a holistic industrial strategy were implemented on the Old Continent, following the example of the USA or China, which would allow not only to achieve the assumed climate goals, but also to develop the economic potential of our region.

“It is no secret that the automotive industry as a whole is facing challenges. Europe is currently at a crossroads, having to choose the best ways to revive a once-thriving industry. We are seeing a worrying trend of increasing job losses and reduced investment in the automotive parts industry in EU countries, while other regions, including China and the US, are reporting more positive forecasts and showing political determination – for example in the form of the Inflation Reduction Act (IRA), which has increased the investment attractiveness of the United States. These actions require a recalibration of European industrial and competitiveness policy,” said Tomasz Bęben, President of the Board of the Association of Automotive Parts Distributors and Manufacturers.

He added that EU automotive parts manufacturers continue to invest significantly in the green and digital transformation, but that these investments are increasingly taking place outside the EU. This applies not only to the automotive industry, but also to industries dependent on it, from steel to chemicals and semiconductors.

“Unfortunately, cuts are to be expected in the area of ​​investment. In 2023, parts manufacturers allocated more than EUR 35 billion for buildings, production equipment and other capital assets. Despite these significant investments, the forecasts for future capital expenditure are significantly lower than those from two years ago. The expected capital expenditure for the years 2022-2029 has been reduced by EUR 27 billion. Recently, there have been increasingly worrying reports of massive job cuts in the automotive industry. To put it bluntly, in 2019, spare parts manufacturers in Germany alone employed 310,000 people, now it is only 270,000, and experts estimate that by 2030 this number will fall to 200,000,” the CEO said.

SDCM calculates that almost 118,000 jobs have already been lost in the parts production sector in the EU since 2019. Only 55,000 new positions have been created. Starting from the second half of 2023, the pace of job cuts is increasing. The organization emphasizes that 2023 was a difficult year for employment in the automotive industry, with as many as 14,429 jobs being lost, while only 10,500 new ones were created. The downward trend continues in 2024, with 12,153 job cuts announced in the first two months of the year, mainly due to internal restructuring. Only 100 new positions were created during this time.

Forecasts from 2021 suggested the creation of 101,000 jobs by 2025, to be driven by electrification and the more stringent Euro 7 regulations. According to SDCM, however, the reality turned out to be diametrically different, with no increase in employment recorded over the past five years, but a decline of as much as 60,000.

“Automotive parts manufacturers point to the way climate policy is being implemented in the EU as the main reason for this state of affairs. The adoption of a narrow technological path leaves the possibility of developing only electric motor technology. The consequence of the gradual departure from combustion engines and the development of electromobility is lower demand for some spare parts. It is worth noting that electric vehicles have one third fewer parts than traditional vehicles. According to research by the European Association of Automotive Parts Manufacturers CLEPA and the Boston Consulting Group, the transformation in the passenger car segment alone would require the retraining of almost 2.5 million workers across the European Union. What is more, over half a million jobs in the supply chain of combustion engines will be unnecessary. Of these half a million, the vast majority will be lost in just 5 years, from 2030 to 2035. These losses will certainly not be compensated by the production of systems for electric vehicles, which will only allow for the employment of 250,000 people. It should also be remembered that new positions will appear, but not at the same time, and above all not in the same number and not in the same place,” the SDCM report summarized.

What about Poland?

Parts manufacturers remind us that a thriving parts production sector has grown in Poland over the last 30 years, both in terms of first assembly and the secondary market. From 2035, these companies will be deprived of the first segment.

“Someone might say that we have a lot of time until 2035, and besides, there will still be the aftermarket. Of course, the spare parts market will remain, but it will only shrink. This revolution in the automotive industry introduced from above will lead to layoffs and closures of some companies. According to the aforementioned data from CLEPA and BCG, by 2040 the expected decline in employment in the Polish automotive industry will reach over 20 percent compared to 2020. We are talking about a decline from over 500 thousand to around 400. However, the fact that according to the announcements of the largest corporations in the industry, it is in Poland that the production of components for combustion engines will be phased out the slowest is optimistic. The reduction of jobs should therefore be much more peaceful in our country than in Western European countries,” emphasized Tomasz Bęben.

Paul Bednarz, journalist of the Business Insider Polska and Onet Biznes editorial staff.

Financial Observer – open license / obserwatorfinansowy.pl


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