Slovak Auto Suppliers Face Profit Plunge Amidst Market Turmoil

Top Firms Report Significant Earnings Drop Despite Stable Sales

Slovakia’s vital automotive parts sector is grappling with a challenging economic climate, as major subcontractors report a substantial decrease in profits despite maintaining sales levels. This downturn reflects broader European automotive industry struggles.

Industry Giants Cut Workforce Amidst Falling Profits

The Schaeffler group, a prominent Slovak automotive subcontractor, has implemented significant workforce reductions, laying off up to 800 employees across its two factories. This move highlights the pressure on suppliers as demand shifts and external economic factors intensify.

The LG Group’s manufacturing arm is also feeling the strain, having undergone extensive restructuring that cost nearly 190 million euros over the past two years. This financial overhaul signals a response to the industry’s changing landscape.

Mixed Fortunes for Key Players

While some Slovak auto suppliers are preparing for expansion, notably Korean Mobis and German ZF, others are facing considerable cutbacks. This divergence in fortunes underscores the varied impact of current market pressures.

Last year, the fifteen largest Slovak automotive subcontractors collectively achieved a turnover of EUR 12.6 billion, matching the previous year’s figure. However, their accumulated profit saw a sharp decline of over 40 percent, falling from EUR 313 million to EUR 185 million.

European Demand Softens, Chinese EVs Surge

The industry’s woes are compounded by waning interest in new vehicles across Europe and a rising tide of imported Chinese electric vehicles. The recent imposition of U.S. tariffs, escalating from 2.5 percent to a potential 15 percent, adds another layer of difficulty for manufacturers and suppliers alike.

Despite these headwinds, Slovak automakers are demonstrating resilience, leveraging their cost competitiveness against Western European counterparts. Their profits even saw an increase, rising from under EUR 700 million to over EUR 1 billion year-on-year.

Suppliers Bear the Brunt of Market Instability

The real pressure points are emerging within the intricate network of parts suppliers, whose fortunes are intrinsically linked to both Slovak and Western car manufacturers facing potential demand slumps. The financial results from the top fifteen domestic subcontractors confirm these mounting concerns.

While some suppliers managed slight improvements or are gearing up for growth, others have experienced more severe downturns, necessitating job cuts. The overall financial health of the sector is increasingly precarious.

Major Profit Hits Reported

The automotive industry has been hit by a confluence of challenges, reminiscent of past difficult periods. The impact of these issues is being felt keenly across the supply chain.

According to the European Automobile Manufacturers’ Association (ACEA), new car registrations in the EU fell by 3.7% in 2023 compared to 2022, indicating a slowdown in consumer demand. ACEA 2023 Data.