The road to Slovakia is expected to be jammed with suppliers now that another carmaker has decided to build a plant in the central European country.

KIA Motors has selected Zilina, Slovakia, as the site of its first European plant.

Carmakers have invested or announced investments totalling €1.6 billion over the last two years. By the time PSA/Toyota and Kia reach full production, Slovakia will assemble more cars per capita than any other country in the world.

Kia will build three- and five-door B- and C segment vehicles in Zilina.

The Korean carmakers rejected Poland as a plant location. Among factors contributing to Slovakia’s successful bid were:

highly competitive labour rates and regulations;
attractive incentive package;
low level of car ownership and high average vehicle age;
existing infrastructure

The average monthly salary in Slovakia is less than one-tenth that of western Europe and less than half the average Polish salary. Unemployment runs around 14% in a country with a relatively well-educated population.

The Slovakian government will contribute 15% of the €700 million Kia will initially invest to start production.

Private vehicle ownership levels are less than half that of Western Europe and the average vehicle is over 13 years old.

Kia plans to sell 500,000 cars in Europe by 2008. It will look to its “domestic” market in Slovakia to drive growth from current levels of around 150,000 units.

The country’s existing automotive infrastructure is generating its own momentum. Suppliers also report that the country has overcome early problems with the local mafia and bureaucracy.

The Volkswagen group has been assembling cars and components in Slovakia for over a decade. VW recently announced plans to lift Slovakian production capacity beyond 250,000 units.

In January 2003, PSA and Toyota chose to locate their joint 300,000-unit small car plant in Kolin, Slovakia.

Kia plans to begin production in 2006 and attain annual volumes of around 200,000 units by 2008. When it hits full production, over 800,000 vehicles will be assembled in Slovakia.

Suppliers are investing too, both to support new customer sites and to take advantage of Slovakia’s lower costs.

The Volkswagen Touareg SUV, assembled in Lozorno, has around 58% local content compared to 42% on the older Polo.

Brose, which supplies door modules for the Touareg and Plastic Omnium, which makes bumper assemblies, are among the companies which have located at the Lozorno industrial park.

“Because Brose’s [door modules] have to be produced ‘just-in-sequence’ it was necessary to build up the plant in Slovakia,” said a spokesperson for the company.