Consultancy firm PwC in co-operation with the Automotive Industry Association of the SR (ZAP) and Slovak Automotive Institute (SAI) surveyed the current situation, key factors and the outlook for the coming years in the automotive suppliers industry in Slovakia.
Most of the automotive suppliers in Slovakia expect revenues to grow this year. A lack of skilled labour is already seen as a potential limiting factor to achieve growth targets. It is more difficult to succeed in this industry – as much as 77% of respondents plan to improve overall effectivity of production in the near future.
76%
respondents expect revenues to grow this year
63%
respondents observed the highest staff turnover in the first year as regards the employment period
33%
respondents plan to relocate additional production to Slovakia
77%
respondents plan to increase the overall effectivity of production capacities in the near future
33%
respondents plan to relocate additional production to Slovakia
67%
respondents consider robotics and data mining and analysis will have the greatest strategic importance in the near future
The key observations of this year’s survey:
- Suppliers located in Slovakia are achieving excellent results as regards to productivity, quality and timeliness of deliveries and rank among the best in their groups.
- As the localization of supplies for OEMs in Central Europe remains strong in 2016 – according to 33% of suppliers, they have to focus on manufacturing improvements (e.g. production and labour efficiencies, production planning, data analysis, product quality).
- Further, the labour market for suppliers is very tight – every fifth company needs more than 50 new employees per year – and therefore one third are redirecting their focus to foreign applicants.
- In spite of these challenges, suppliers remain positive, and predict revenue growth in 2016 and increased staffing levels.
- The suppliers’ thoughts on the arrival of a new car manufacturer are about new opportunities for expansion, but also on labour force availability.
"Generally, Slovak automotive suppliers are positive about their growth prospects. It seems that Slovakia continues to be a sunny island for the industry, and recent investments confirm the future potential."
Jens Hörning, Partner, Slovakia and CEE Automotive Industry Leader, PwC Slovakia
Firms set to grow in 2016
In this year’s survey almost none of the firms had a negative outlook. Although slightly less firms expect double-digit growth, almost a quarter of respondents expect growth exceeding 10%. More than half of respondents believe their revenues will grow by at least 5% y/y, and 76 % of respondents expect growth. Almost 15% of respondents expect their revenues will be little changed and 9% expect a fall in revenues.
This is why Slovakia and the neighbouring region are currently considered to be a good location. Suppliers have followed the manufacturers by locating assembling facilities in Slovakia and in neighbouring countries, as the region is enjoying a car manufacturing boom. Expectations are similar as regards headcount changes, although they are slightly more moderate which shows that effective growth and increased labour productivity is reliant on new hires and applying modern technologies.
Supplier growth held back by labour shortages and educational limits
Automotive suppliers are looking to hire new staff. Two-thirds of firms expect they will need a double-digit increase in staff numbers. 17% of respondents believe the number of new staff needed will be 30 – 50. More than one-fifth of firms will need at least 50 new hires.
With such demands on the labour market, it is not surprising that compared to 2015, the availability and quality of labour is a factor affecting suppliers’ growth targets. This is considered not to be a problem only by 12.5% of firms. However, four fifths of respondents considered this to be a factor limiting production development. A number of respondents are experiencing difficulties with recruiting staff for their non-production divisions. Many employees must make longer commutes, often receiving support from the employer. One-fifth of respondents stated that 11% - 30% of their staff travel more than 50 km to work. Almost 80% of firms reported a one-digit number of longer commutes.
What do you expect the development of your revenues will be in 2016?
What is the number of new hires you need in your company per year?
Do you consider the availability and quality of skilled labour an issue of your business?
Do you consider the availability and quality of skilled labour an issue of your business?
“As for last year, more than 80% of suppliers confirmed that the availability and quality of labour is a major problem for production and other divisions. Almost 40% of suppliers stated that this is limiting their ability to win new production contracts. Even if suppliers succeed in finding new hires, the turnover rate within the trial period and in the first year is significant and has a big impact on companies’ costs. According to the survey, there are numerous reasons for the high turnover of new employees but some, e.g. distance to work and no interest in a long term job, may require special attention at the national level in the form of increased support for workforce flexibility/reallocation or incentives for long-term employment.”
Peter Mrnka, Partner, Automotive Industry Specialist, PwC Slovakia
Education and cooperation with schools and universities
The situation on the labour market clearly shows that, at present, industrial companies cannot expect substantial assistance from schools and universities by generating more qualified graduates. Improvements are expected from dual education, which will increase the number ofgraduates with theoretical knowledge and the relevant practical technical experience. The good news is that firms are well informed about the dual system and are aware of its potential benefits.
However, concerns still persist about to what extent this system will be able to solve the lack of qualified staff. Almost three fifths of respondents stated that their participation in the system is hindered by a lack of internal sources, i.e. materials and professional teachers. There is also lack of finance and analyses are not available giving the cost for firms to participate in the system. The survey results show many firms are not confident about whether the graduates of the dual programme will remain with the firm after graduation. Even the optimists expect that improvements to the numbers of potential hires with practical experience will not be seen for at least 3 years.
Data analytics is the technology with the greatest strategic importance
The use of data is the cornerstone of Industry 4.0. However, the massive increase in information from a growing number of sensors, devices, applications and information systems is of little value without proper analytical techniques. This fact is confirmed by the increasing strategic importance of data analytics in the automotive industry. The Global Industry 4.0 Survey conducted by PwC shows that 50% of respondents use data analytics for important management decisions and, in five years’ time, this number is likely to increase to 83%.
67% of companies consider data analytics to be technology that will be of the greatest strategic importance for the automotive industry, an increase of 26% compared to last year. The second biggest climber is the sensor area (up by 15%) ranking even ahead of the expected growing trend of robotics (8%). The increased use of smart devices, many of which operate autonomously, will increase the importance of innovations in power systems and batteries.
Which of these technologies will be of the highest strategic importance to your organisation over the next three to five years? Select 5 technologies from the following list.
How well informed you feel, concerning the dual education system (vocational training) launch?
Which of these technologies will be of the highest strategic importance to your organisation over the next three to five years? Select 5 technologies from the following list.
About Survey
The Survey was conducted by consultancy firm PwC in co-operation with the Automotive Industry Association of the SR and Slovak Automotive Institute. Addressed automotive suppliers replied via an on-line questionnaire or printed questionnaire from 3 March to 6 April 2016 and 75 car suppliers operating on Slovak market participated in the Survey.
This report looks at the key findings in the car suppliers market, gives a comprehensive analysis of the business model, and provides an assessment of the 2014 results and its key factors, and an outlook for the coming years.
About ZAP
The Automotive Industry Association of the Slovak Republic (hereafter “ZAP SR”) is an open, influential, and unifying organization defending the interests of its members and representing a key sector of the Slovak industry. The vision of ZAP SR for the years 2016-2020 is to be a leader in initiating and forward-ing optimal conditions for permanently sustainable competitiveness of the automotive industry. Its main strategic objectives include to promote the requirements for creating the economic strategy for Slovakia’s development, to define and promote the requirements for making skilled labour available, to support the development of the environment for applied research and innovative capacities of businesses, to define and promote the development of subcontractors, to minimize negative environmental impacts within the life cycle of a motor vehicle and to initiate the support for selling cars with alternative energy sources in the Slovak market.
About SAI
Slovak Automotive Institute is an independent think-tank, providing business intelligence services and analyses, relevant to the automotive and related industries and transport.
About PwC
At PwC, our purpose is to build trust in society and solve important problems. We’re a network of firms in 157 countries with more than 208,000 people who are committed to delivering quality in assurance, advisory and tax services. Find out more and tell us what matters to you by visiting us at www.pwc.com/sk.
