bne: Ukraine’s German factories left ticking over on the EU border

Article published on June 15th 2018 on the bne IntelliNews website.

Twenty kilometres from the Carpathian city of Uzghorod and barely 2km away from the Slovakian and Hungarian borders, in what used to be a deserted swamp, the Eurocar plant stands mostly silent. Ten years ago, 1200 people worked here, assembling Skoda cars for the Ukrainian market. Today, after two economic crisis, a change of government and a war with Russia, production has been drastically cut; about 250 people go to work at the plant each day now.

Ukrainian’s westernised car sector is a well-kept secret and epitomises the challenges the country faces when it comes to modernising its industry. The assembly line, modern and up to all European standards, is still operational, but only a couple dozen workers occupy the large hangar. At its peak, the plant was capable of producing more than 4000 cars a month. In April, only 615 cars came off of the assembly line.

Still, there is a silver lining: according to UkrAutoProm, an association of Ukrainian auto manufacturers, the total number of cars produced across the country in April was also 615, making Eurocar the sole automobile producer in Ukraine. “We have the capacity to produce more once demands picks up. We are ready,” Volodymir Litvin, head of the SKD department, told bne IntelliNews.

Since the early noughties, German companies involved in the automobile industry (or, in the case of Eurocar, Ukrainian companies with German investment) have rushed to Western Ukraine to take advantage of the low cost of labour and the country’s advantageous geographic position. Some, like Eurocar, have been looking to tap into a promising Ukrainian market, which peaked in 2008, when locals bought more than 600,000 cars (analyst expect that number to reach 100,000 this year).

Other German companies focused on the production of automotive car parts that are then sent to Western countries for final assembly. Nearly all of them kept investing in Ukraine despite the crisis, but experts say that the political context and continuing conflict in the East has kept many potential investors at bay.

Read the rest on the bne IntelliNews website.

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