The Czech automotive industry is not simply one sector among many. Accounting for roughly 10 per cent of GDP (the highest share of any European economy), the sector sustains more than 430,000 jobs, both directly and indirectly. This is why changes in the global automotive supply chain or market demands risk affecting the future of the Czech national economy.
The accelerating shift toward electric vehicles, combined with rising electricity costs, intensifying competition from Chinese manufacturers, and a dense and evolving EU regulatory framework, is eroding the competitive foundations that Czech automakers built over three decades. What makes this moment especially consequential is that the Czech Republic has not updated its national automotive strategy since 2017, years before most of the challenges and opportunities currently facing the automotive industry emerged.
The potential harms of inaction are significant. International Monetary Fund (IMF) modelling indicates that, without domestic EV production capacity, Czech GDP could contract by around 1.5 per cent under a scenario in which China gains fifteen percentage points of EU market share. The European Association of Automotive Suppliers (CLEPA) projects that up to half of all powertrain jobs could disappear between 2030 and 2040. The window for a proactive policy response remains open, and the political moment is unusually aligned with the economic necessity. The new Czech government’s programme already prioritises reducing energy costs, increasing Research & Development (R&D) investment, and transforming the workforce. What has been lacking is a sufficiently specific, evidence-based foundation to translate those commitments into a coherent industrial strategy.
To develop this ambition, the analysis rests on three interlocking research layers, each designed to complement and test the findings of the previous one. The first is desk research, which establishes the factual baseline and identifies four key pillars structuring the sector’s competitive prospects: energy, R&D, labour, and the EU regulatory framework. The second layer consists of a series of semi-structured interviews with 13 experts from industry, government, academia, and advocacy. Their responses were systematically coded and cross-compared to ensure the expert evidence informs the analysis. The third layer consists of four focus groups conducted by STEM/MARK with 32 participants, selected to ensure balanced representation across age, gender, education, economic status, and political affiliation, distributed across Czech regions. Their function is to test the political viability of the policy recommendations stemming from the analysis. This exercise aims to identify where public opinion provides a foundation for action, and where it sets limits. Together, the three layers produce findings that are robust where they converge, and analytically useful even where they diverge.
The report’s policy architecture is built around five interdependent priorities. They are designed to be mutually reinforcing and interconnected.
The first priority is to build a battery manufacturing ecosystem. The absence of a confirmed gigafactory is the single most consequential gap in Czech industrial policy. Closing it requires two parallel moves: a durable political commitment to competitive and predictable industrial electricity pricing - building on the 2025 decision to transfer the POZE levy to the state budget - and an integrated investment offer that combines streamlined permitting, pre-prepared industrial sites, skilled workforce guarantees, and credible environmental safeguards. Focus group evidence confirms that cautious public support for battery production exists, but it is conditional on visible environmental protection and demonstrable domestic economic benefit.
The second priority addresses the coming collision between acute labour shortage and structural displacement. Czech unemployment stands at 3.1 per cent, with vacancy rates among the highest in Central Europe; yet CLEPA projects that half of powertrain jobs could vanish by 2040. Bridging that contradiction requires three interlocking measures: a five-year Automotive Transition Training Fund with 60/40 public-private co-financing, three to five regional training academies in Nošovice, Kolín, and Plzeň targeting Tier-1 and Tier-2 supplier workforces that single original equipment manufacturer (OEM) pipelines do not reach and a dedicated support programme for Small and Medium-sized Enterprises (SMEs) that lack the internal capacity to plan or finance their own workforce transition. There is strong public support for accessible retraining and reskilling programs aligned with labour market needs. However, companies are expected to share responsibility for workforce adaptation rather than rely solely on public funding.
Third, energy cost reduction must be pursued through structural reform rather than direct subsidy. Czech industrial electricity prices more than doubled between 2021 and 2025 and now rank among Europe’s highest. The focus groups were unambiguous: measures that shift the burden from profitable firms to households are uniformly rejected as unfair. The appropriate instruments are therefore differentiated industrial tariffs achieved through network charge rebalancing, accelerated permitting for new generation capacity capped at 12 months against current timelines of 3 to 5 years, and regulatory facilitation of a robust corporate power purchase agreement market that allows firms to lock in long-term price certainty without high fiscal cost.
Fourth, the Czech Republic must address its structural dependency on foreign R&D decision-making. Czech automotive R&D intensity stands at 1.82 per cent of GDP against an EU average of 2.3 per cent, and strategic research decisions remain with parent companies in Germany, France, and elsewhere. Two proposals target this: a Czech Applied Research Alliance for Automotive, modelled on the Fraunhofer institutes and co-financed by industry and technical universities; and a reformed investment incentive framework that conditions future automotive aid on the establishment of domestic R&D centres, the employment of Czech researchers, and intellectual property-sharing provisions. The goal is to stop public resources from subsidising value creation that ultimately accrues abroad. There is a strong public support for this priority. The focus groups support it, especially when public funding is channelled through Czech universities and the resulting benefits remain within the Czech Republic.
Fifth, and finally, the transition support framework must explicitly reach SME suppliers. Tier-2 and Tier-3 suppliers face significant exposure to the EV transition with limited financial reserves and no internal capacity to plan for it. The existing equipment scheme is calibrated for large firms, leaving smaller suppliers at risk of being underserved. A dedicated supplier transformation fund - combining Modernisation Fund resources with European Investment Bank guarantees to finance pivots into new product lines - and a targeted technical assistance programme offering hands-on consulting on technology upgrade paths, market repositioning, and skills assessments would lower the barriers that are currently preventing smaller firms from beginning the transition at all.
The alternative to coordinated action is not the status quo. In a globalised economy where most of Czech automotive production is export-oriented, market forces and EU regulations will drive change regardless of Czech policy choices. The key question is whether that change is managed or unmanaged. The Czech Republic retains significant competitive assets: the highest automotive FDI stock per capita in Central Europe, an integrated domestic OEM, Škoda, with full development capabilities, deep integration with German supply chains, and a workforce whose adaptability this research consistently documents. Whether those assets are leveraged strategically or dissipated through policy fragmentation is a choice that still belongs to Czech policymakers - but the clock is ticking.
You can read our first Noted by Shared Ground issue “The Future of Czechia’s Automotive Industry – A Challenge for Czechia, for Europe, and for the Environment”.
You can listen to our latest Reset by Shared Ground episode with Tomáš Prouza (Czech Confederation of Commerce and Tourism) and Nicola Bilotta (GLOBSEC), “Czech Car Industry at a Crossroad - A Race for Competitiveness”.
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