A confluence of factors is challenging the industrial structure and the long-standing business model of four Central and Eastern European (CEE) countries: Czechia, Hungary, Poland, and Slovakia—collectively known as the Visegrad Four (V4). Since their transformation from command economies to free markets in the early 1990s, the automotive industry has been the backbone of their manufacturing sectors and, by extension, their economies.
Two major trends emerging in the 2020s now pose considerable challenges to the V4’s established automotive sectors: the rise of EVs and the increase in geopolitical tensions and protectionism. East Asian EV and battery producers have surpassed their European counterparts in terms of production processes and technological expertise. At the same time, geopolitical tensions, such as tariffs, transportation risks, and military conflicts, have disrupted free trade and reshaped the export pathways of the automotive industry.
This paper provides a comprehensive overview of EV and battery investments by East Asian firms from China, South Korea, and Japan across the V4 region and discusses national approaches to cooperation with East Asian investors. The authors outline how Central European countries might leverage the transition, including the investments of East Asian companies, by focusing on policies that facilitate technology transfer, increase value-added, boost workforce development, and enhance R&D in the automotive sector.
Executive summary
- The European automotive industry, a long-standing powerhouse of the EU economy, is now navigating unprecedented challenges. The shift towards electromobility is unfolding against a backdrop of weakening competitiveness, geopolitical tensions amid the US-China rivalry, a rising tide of protectionism, pressure from competitors’ industrial policies, and the urgent imperatives of climate action under the EU’s Green Deal. The V4 countries—Czechia, Hungary, Poland, and Slovakia—whose economies are heavily reliant on the automotive sector, are at the forefront of these transformations.
- The V4 automotive sector has been built around foreign investment, which has transformed the region into a key node in global automotive supply chains, centered around Germany. Since the 1990s, East Asian actors have also been integrated into these supply chains alongside Western investors. However, the recent shift to electromobility has ushered in a new wave of investments, particularly in the emerging battery sector, reshaping established manufacturing and supply chain dynamics.
- While South Korean and Japanese Original Equipment Manufacturers (OEMs) are upgrading their existing lines for electric vehicle (EV) production, Chinese OEMs have emerged as the largest investors in future EV production, with major investments in Hungary (BYD, up to €5 billion) and Slovakia (Volvo/Geely, €1.2 billion).
- China and South Korea are key players in the V4 countries’ battery and EV parts sector, with €14 billion and €12.4 billion in investments respectively, both already implemented and announced. Japanese investment in these parts of the supply chain has been more limited, totaling around €900 million. Most of the East Asian investments are concentrated in Hungary and Poland, with smaller allocations in Slovakia. Czechia remains largely absent from the investment map.
- East Asian investors are driven by multiple factors when choosing where to locate manufacturing in Central Europe: leveraging existing automotive supply chains; meeting political demand from the EU; building redundancy and spare capacity; reducing transportation risks; diversifying supplier bases; ensuring production continuity in the event of geopolitical disruptions; and circumventing tariffs.
- In addition to the quality of the investment environment and the direct and indirect incentives offered by V4 governments, bilateral relations with East Asian countries also play a mediating role in attracting investment.
- In Hungary, close ties between the government and Beijing have facilitated significant Chinese involvement in the EV and battery sector, while South Korean investors have also benefited from generous investment support policies. In Poland, the significant presence of South Korean firms, particularly in the battery sector, appears to have fostered closer ties in other areas and contributed to enhanced political cooperation between Warsaw and Seoul. Meanwhile, the Czech government’s skeptical stance towards China partly explains the lack of Chinese investments in the sector.
- Current governmental policies across all four countries primarily emphasize greenfield foreign direct investment (FDI) and fostering a favorable business environment. However, low levels of government expenditure on research and development (R&D) and insufficient investment in education and workforce development hinder efforts to move up the value chain. As a result, the V4 states risk remaining primarily assembly hubs, an issue further exacerbated by the ongoing transition to electromobility.
The publication is one of the results of the project “East Asian electric vehicle makers in the V4 countries’ electric vehicle transition” coordinated by CEIAS and implemented in cooperation with OSW Centre for Eastern Studies (Poland), Palacký University Olomouc (Czech Republic), Corvinus University of Budapest (Hungary).
The project is co-financed by the governments of Czechia, Hungary, Poland and Slovakia through Visegrad Grants from the International Visegrad Fund. The mission of the fund is to advance ideas for sustainable regional cooperation in Central Europe.
