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The closure of the Škoda car plant could harm the entire Czech economy

The closure of the Škoda car plant could harm the entire Czech economy

Thousands of jobs could be at risk.

9. October 2021 at 15:55 TASR

Prague. The planned shutdown of the Czech automaker Škoda Auto could have serious consequences not only for the automaker itself, but also for its suppliers, and ultimately for the entire economy.

Thousands of jobs could be at risk. Economists, contacted by the daily Bravo, agreed with this.

“Skoda itself accounts for 5% of the gross domestic product of the entire Czech Republic and nearly 10% of exports. Any closure of its operations will have huge economic consequences. And it will be difficult not only for the company, but especially for the Czech industry,” said Radek Spikar, Vice President of the Czech Association of Industry. And trade for the Czech Republic, for Bravo: “The supply chain is extensive, in which it is. In many cases it is highly dependent.” The novinky.cz server reported this.

Chip shortage may continue until 2023

According to Deloitte analyst Václav Franče, every billion in lost sales in the auto industry would result in a sales loss of CZK 1.9 billion (€74.7 million) and CZK 0.5 billion at the level of GDP in the entire economy. In addition to the loss of about 600 jobs.

Franchi added: “Revenues at ŠKODA decreased by 36 billion CZK last year as a result of the epidemic. It is difficult to determine the revenue deficit this year due to the lack of chips.”

“It’s a blow to the entire Czech economy and a very unfavorable signal for the Czech auto industry. It employs about 180,000 people in the country,” said Lucas Kovanda, an economist at Trinity Bank. According to him, the situation in Škoda Auto threatens tens of thousands of jobs.

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It will be important how quickly production resumes. At the same time, there is speculation in the world that the shortage of chips will continue until 2023. “By then, it will not be possible to solve the situation in any other way, as well as through further repetition on a large scale,” Kovanda added.

Unhealthy addiction to imports

BHS economist těpán Křeček has similar concerns. “Reducing or shutting down production at our largest automaker will have dire consequences for our industry.

Since this is unlikely to be a short-term issue, many of the subcontractors that rely on Skoda sales are in danger of disappearing. This will be accompanied by job losses.”

According to him, this now clearly shows the weakness of the Czech Republic and its unhealthy dependence on the import of components from abroad. “At the same time, the weakness of the Czech industry is fully manifested, which lies in an excessive orientation towards the automobile industry,” Kojic added.

According to Pavel Sobíšek of UniCredit Bank, a complete or partial stoppage of business only at Škoda Auto will affect two-thirds of the Czech auto industry.

“If work stops, then this means that the Czech Republic will lose about 6% of its GDP during this period. It will be a huge blow,” Sobiesek noted, adding that he would then have to affect households directly or indirectly. “Of course, a chain reaction will affect the rest of the economy,” Sobiesek said.