E (3:26)

I very like. Yeah, from the child. Cars is my passion. And now I am part of the team and I can make the cars. So that's something as a dream work.

B (3:39)

Is it a well paid job?

E (3:43)

I think it is, because some are friends when I'm asking them about the wages, salaries and like this, so they have something less. So I think is maybe. Maybe is the best in this region.

B (3:58)

Marcel tells me that he worked for a number of years in the uk, Northern Ireland mainly, before landing this job back in his native Slovakia. As for Simona, she was studying business before. This is not her dream job, she tells me, but it does have its good points.

D (4:15)

Half of my family works here, so I wanted to try. I like the people. I like working with people. And salary is okay? Yes, it's very good. In comparison with other companies, I earn about.

B (4:35)

Euros, just over $1,500. Later on, that will rise. Kia says the average salary here is about $2800. Are you proud of Slovakia's performance when it comes to car production?

D (4:49)

Yes, I'm proud of that. I like the fact that thanks to that, the production supports our society.

B (4:58)

Practically everyone who works here is local. The Korean presence is a few dozen senior managers who live in a gated community. They're built specially on the outskirts of a village a couple of kilometers away. Further down the assembly line, I stop at a machine that installs the aircon that plays a bit of Mozart as it moves forward to warn people to get out of the way. And then I see a car driving around that is completely swathed in padded cloth. Please don't photograph that, says the Kia person accompanying me, even in its dark grey sheath. It's their new all electric vehicle, the EV2. Kia has invested $126 million in adapting their production lines for the EV4, which it started making here in August, and this new ev, which will go into production in February. Kia opened this factory in 2006. The President and CEO of Kia Europe is a Frenchman called Marc Edrich. He says it was a big move and a successful one, which is why they're investing more here.

E (6:12)

It's a big factory with a maximum capacity of 350,000 units. We have produced more than 5 million cars and it is representing 8% of the Kia's global workforce. The factory was instrumental to the growth of Kia. Today in Europe we are around 4% market share and we grew, let's say, together with the factory.

B (6:38)

Where are you selling the cars you make?

E (6:40)

Here 90% of the production is dedicated, let's say, to Kia Europe responsibility. So this is the big European up to Turkey. Actually the biggest country is the uk. So you may know that in the UK we are number three. And on the passenger car market then we are the following key markets for us are Spain, Italy and Germany.

B (7:09)

Why is Slovakia a good place to build cars?

E (7:13)

Slovakia is really in the in the heart of Europe, quite well connected, let's say to the big markets. The quality of the manpower was also, let's say, very, very important. So Slovakia gives us access to a skilled local workforce and high quality supplier. Slovakia is the biggest producer of cars in the world per capita. So the supplier base is enormous.

B (7:48)

This is critical why here rather than in Korea?

E (7:53)

Producing closer to your customer is always an advantage. It allows you also, let's say, to have a smaller lead time. So some customers are not ready, let's say, to wait three, four, five, six months to get their cars. You have also new developments that we have seen recently in Europe, putting in place some incentive linked to the location of the production. If you don't produce in Europe, you are not eligible, let's say to the electric car grant in the uk or you are not eligible to the ECO score in France.

B (8:38)

There's also historically a sizeable wage gap between east and West Europe. Peter Prokop is the Czech German head of give, a management consulting firm that advises clients in the automotive sector on things like where to locate production, how to stabilize supply chains and how to run factories more efficiently.

F (8:59)

The first story began with cost advantage when Volkswagen, PSA and other expanded eastwards in the 90s and 2000s. So wages were far lower than in Germany or in French or other Western countries. But the region was inside the European Union or on the way to join it. The labor cost was 20% of the labor cost in Germany.

B (9:28)

Wow. One to five.

F (9:30)

Yes. On the beginning, definitely.

B (9:33)

Is it still a good bet going to East Central Europe?

F (9:36)

Yes, maybe. On one hand you have still lower wages.

B (9:42)

How much lower now?

F (9:44)

I would say 60%. 60% of the Western wages in Eastern Europe still. But you have also high productivity, so it's definitely competitive.

B (9:57)

The acquisition of the land the Kia factory complex stands on, which is the size of 270 football pitches and belonged to dozens of private owners was a complicated legal and financial process. It couldn't have been done without the efforts of the municipality. And the local authorities still work closely with Kia at the moment. For example, they're pushing forward the building of a new highway between Ilina and Poland, which would be useful for the company's logistics. It does all this because when a car firm like this moves in, the investment is colossal. Kia says it's about two and a half billion dollars so far here. As the mayor of Gilina, Peter Fiabane, explained through his interpreter, the car industry has been a boon for this city.

D (10:48)

It has been a huge decline in unemployment and a significant increase in the economic strength of the region. And Today, more than 20,000 people are directly employed by KIA and other companies that are linked to Kia by production. Today in Jelena, we have also other innovative companies, as for example, IT Cluster or the University of Jelena.

B (11:21)

It's a similar story in some other cities. Thanks to Volkswagen in Bratislava, Stellantis, formerly Peugeot Citroen in Tranava, Jaguar Land Rover in Nitra, and Volvo building its new plant in Kosicha and feeding those manufacturers with parts are over 360 suppliers. 60% of foreign investment in Slovakia is in the automotive sector, says Robert Semoncic, CEO of the Slovak Investment and Trade Development Agency. To attract These carmakers, or OEMs, original equipment manufacturers, the government also offers sweeteners.

C (12:00)

He says incentives could be in two forms. It's either cash grant, which is basically a percentage of that capital investment from the beginning can be reimbursed, or also the tax vacation, if you will, for 10 years for an investment. And also we have some deductible for R and D in their tax returns, potentially. So it is important factor mainly for these huge multi billion dollar investments.

B (12:33)

Kia didn't want to go into detail about the government incentives it received for coming here. But Marc Edrich did say it received a tax credit of $34 million for transforming its production lines for its new electric vehicles, the total cost of which was 126 million. The government therefore contributed just over a of the cost there. This, says Robert Simoncic, is representative.

C (12:58)

Typically, the levels of incentives are based on the region. In Slovakia, it could go from like 20 to 40 or 50%, potentially. Now Slovakia prefers tax vacation more than cash grains, because that's more palatable for the country.

B (13:20)

You're listening to Business Daily on the BBC World Service.

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B (14:28)

I'm John Laurenson and today I'm looking at the success of the car industry in Slovakia. At the Zhilina Technical School, two 18 year olds operate a robot that uses a pneumatic piston that they programmed to pick things up. Kia bought the robot. It sponsors a dual education program here. Around 100 students alternate each week between studying at the school and working at the factory.

H (14:56)

My name is Richard Havada. I'm 18 years old and I go to the school because I. I thought it will be cool, you know. I liked doing like things with electricity and like doing mechanical things like repairing them and looking into them. I'm in the dual education program. When I'm in school I get payments like €300 per three months based on how good my grades are, how I behave in school and stuff. You go to work there in Kia, it's like you help the maintenance workers or someone who needs help.

B (15:38)

What do you want to do when you finish this school?

H (15:41)

Well, I would like to be the maintenance worker there at Kia because it's a fun job if you think about it. Because if there's new stuff like you have to repair every day, that something gets broken every day so you learn something new.

B (15:57)

This school is quite popular. There are more people wanting to come here than there are places, which is also the case at Gilina University. When I visited, it was late on a Friday afternoon and there weren't many students about. But there were loads of 11, 12, 13 and 14 year olds taking part in a sort of homemade robot Olympic games where the children's robots compete to follow a squiggly line on the ground, for example, or do battle in Jousting competitions. This university, one of the top three in Slovakia, was set up in communist times. And says Josef Ristvey, vice rector for international relations and marketing, it has a strong technical speciality. It received some funding from kia.

I (16:43)

We are former University of Transportation, so automotive is in our heart and that's what we have in connection and in common with kia. We have mechanical engineering, electrical engineering, informatics, information technologies and security.

B (17:00)

8,000 students study here and says Joseph Ristvay, their prospects are good.

I (17:06)

Definitely they can expect a job after they graduate. That's the most important part of today. Our students are really prepared for industry. Slovakia is an industrial country and that's what we are proud that they can really go to the companies once they graduate in the middle management and higher management. Two vice presidents of the KIA are nowadays graduates of Zhilina. And maybe, if I may add, also the companies that subcontract Kia and the whole automotive ecosystem is really something where our graduates can go for a job later. Lets say 400 graduates end up in connection to the automotive industry every year. We have one saying at the university that you can make a manager from a technical guy, but you never make a technical guy from a manager.

B (18:06)

What is happening in Slovakia with car manufacture is happening all over East Central Europe. In Czech Republic there's Hyundai and Toyota as well as Volkswagen owned Skoda in Poland. Toyota, Stellantis and Volkswagen, Audi, Mercedes, Benz and Suzuki are in Hungary, where China's BYD is also building a factory. Ford and Renault owned Dacia are in Romania. Renault is in Slovenia. Fiat and Peugeot are in Serbia. Great Wall Motors is in Bulgaria, on the former communist flank of the eu. Low wages, a tradition of industry and educating to provide manpower for industry has come together with Western and Asian technology and management and is proving a winning combination. Is there trouble ahead? A couple of challenges, possibly. If electric vehicle sales continue to disappoint, Slovakia may be more exposed than others, as a lot of its cars are EVs. Also the AI and robot revolution. The more workers are replaced by robots, the less this country's competitive wage advantage will matter. But for the time being, at least, Slovaks can be proud. This is a small country, a relatively poor one by European standards. But when it comes to making cars, Slovakia is a giant. You've been listening to Business Daily from the BBC World Service from me, John Laurenson. Goodbye.

G (19:51)

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