PSA/Peugeot-Citroen's selection of Trnava for an assembly plant to open in 2006 reflects the increasing maturity of Slovakia as an auto producer.
Trnava will become Slovakia's second auto assembly plant after Volkswagen's Bratislava facility. But Trnava is just the latest site in a growing cluster of assembly plants and supplier network in Slovakia and the Czech Republic. Volkswagen has four assembly plants in the two countries and PSA and Toyota are building a 300,000-unit capacity Czech plant in Kolin.
"Between Mlada Boleslav [Czech Republic] and Bratislava [Slovakia], there will be 1.3 million passenger vehicles produced a year," said Jan Lesinsky, president of the Slovak society of automobile engineers.
But five other plants are located along the Slovakia border in either Poland (Opel, Fiat, and the idled Daewoo-FSO plant) or Hungary (Audi and Suzuki), helping Slovak suppliers.
Even compared with Poland and the Czech Republic, Slovakia labor costs are a relative bargain. That's part of the auto sector's growth in Slovakia, but Lesinsky said this is not the major factor.
"Material sources such as steel and aluminum are also here," he said.
While Slovak industry was initially set up for the large-scale production of sophisticated items, this is changing.
"There was a big evolution in preparing companies to be able to supply the VW group, not only Skoda," he said.
In addition, Slovakia has been a natural starting point for both VW and Skoda to outsource production.
Production is accelerating at the VW plant in Bratislava, currently the only Slovak plant manufacturing passenger cars. The plant produced about 235,000 units last year and is expected to reach 280,000 to 300,000 this year, said Robert Stano, a spokesman for the Slovak automobile manufacturers' association. The plant produces the VW Polo and Touareg, and assembles a few Seat models.
Stano said that the future PSA plant will be for assembly only, not a full manufacturing line. Current production numbers fail to tell the whole story.
"The VW Touareg is a new product and with [sister vehicle] Porsche Cayenne, 57 percent of these products are put together directly in the Slovak Republic," said Lesinsky.
The supplier sector is booming.
Already, Lesinsky estimates that there are more than 100 suppliers in Slovakia, contributing a third of the E3.6 billion output of Slovakia's automotive sector.
The Slovak government is also finding some success in establishing supplier and technology parks. At both Bratislava and Trnava, manufacturers are devoting space to suppliers.
New companies are moving into Slovakia from western Europe and the Czech Republic in what Lesinsky calls the "networking of daughter companies." He cites Hella, with two subsidiaries in Slovakia, as a prime example.