A cold shower. Officially, the decision is only postponed, but it would have been timely to brighten up the gloomy Czech economic outlook for the coming months. Friday, December 9, the Volkswagen group announced that, due to economic uncertainties, it would not immediately choose the location of its next gigafactory of electric batteries, planned in Eastern Europe.
The Czech government has been fighting for months for the site of Plzen, in the center-east of the country, to be preferred to its Hungarian, Slovak and Polish competitors. “If there is the option of building a battery factory in Europe, where electricity costs 15 cents per kilowatt hour, while it is possible to get it in China or America for 2 or 3 cents, we are not in a position to affirm that we will make this choice out of solidarity”declared bluntly Thomas Schäfer, the boss of the group, in stride.
For the Czech Republic, the stakes are colossal: “This gigafactory is decisive for the future of our automotive industry and, above all, its ability to make the switch to electric”, summarizes Jiri Dvorak, specialist in the subject at the firm Grant Thornton, in Prague. And, more broadly, for the entire country: the automotive industry alone accounts for 10% of gross domestic product (GDP), 8% of jobs and 25% of exports.
“Electro-intensive industries”
The entire industrial sector, highly dependent on Germany, which absorbs a third of its production, represents nearly 30% of GDP – the highest level in Europe. “However, it has been particularly badly treated since the outbreak of the pandemic” of Covid-19, at the beginning of 2020, explains Grzegorz Sielewicz, specialist in the region at Coface. Penalized by the collapse in demand and the German slowdown, the industry has, in the process, faced shortages of semiconductors, hampering the resumption of production in 2021.
The government was slow to react, then introduced, in November 2022, a cap on gas and electricity prices
“The Volkswagen model I ordered in October 2021 won’t arrive until April 2023, can you imagine? », illustrates Jiri Dvorak. And, unsurprisingly, the energy crisis has made the situation even worse. Before Russia’s invasion of Ukraine on February 24, 2022, the country was 52.5% dependent on fossil fuels – coal, oil and gas largely imported from Russia – 40.8% on nuclear, thanks to its two power plants, and only 6.7% of renewables.
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