PRAGUE (Bloomberg) -- Automakers are returning some production to Europe from China as cost advantages in the world's biggest auto market weaken, providing an opportunity for central European nations to attract investments, a Volkswagen Group executive said.
While several years ago expectations were for a "massive transfer" of automobile operations to Asia to save on labor expenditures, "we are seeing a rather opposite process at present," Martin Jahn, managing director of VW Group Fleet International, said. "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," said Jahn, who also chairs the Czech Automotive Industry Association.
Europe's car sector has been showing signs of growth in the past one and half years, with 2014 new passenger car registrations up 5.7 percent, according to industry association ACEA.
The trend is an opportunity for countries such as the Czech Republic, which has room to continue increasing production in its car industry, Jahn said. Investors including Volkswagen's unit Skoda as well as South Korea's Nexen Tire Corp. and Hyundai Motor Co. plan to spend more than a combined 31 billion crowns ($1.3 billion) in the next five years in the central European country.
The Czech Republic and neighboring Slovakia are among the world's biggest car producers per capita and both post-communist European Union nations are offering incentives to foreign investors as large parts of their economies rely on exports.
In the Czech Republic, the planned Nexen factory may create more than 1,000 jobs and a Skoda production plant in Kvasiny will create as many as 1,300 jobs, the companies have said.
While the Czech Republic remains competitive because of its central location and relatively low labor costs, it's grappling with an increasing shortage of qualified personnel, Jahn said.