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The automotive industry in Poland – what we produce and who are our customers? What does the automotive market in Europe look like?

30 June 2020

Although Poland does not have its own brand of cars, it is today one of the largest European production area of parts for the world's biggest automotive players. The automotive industry is one of the strongest pillars of the Polish economy, which in 2019 generated 8% of GDP and 21% of export value. Pandemic crisis has had many negative effects on this sector. We discuss the condition of the automotive industry and the strategy of automotive companies in the COVID-19 era with Michał Matuszewski, director of the Knauf Industries plant in Wrocław.

The automotive industry is often described as the second most important sector of the Polish economy, which generates almost 15% of Polish exports. What do we specialize in and what makes us attractive to foreign customers?

Poland is currently the main supplier of components and parts in Europe. In my opinion, the attractiveness of our country as the main supplier to the automotive industry results from an optimal correlation between three factors - a favourable location, high level of employees' competence and relatively low labour costs. The companies located here are known for their care for quality and investment in innovative technologies.

Knauf Industries' factory in Wrocław – production for the automotive industry.
Knauf Industries' factory in Wrocław – production for the automotive industry.

Knauf Industries is a one of the examples confirming this. We specialize in two of the most important plastics processing technologies for the automotive industry: injection of thermoplastic materials and EPP and EPS pressure moulding. We supply precisely moulded plastic elements both for car interiors, which have an aesthetic function, and strictly technical components used in vehicle exterior structures. We use the technology of pressure moulding of parts made of modern expanded plastics, which is currently becoming more and more popular in the automotive industry.

From expanded polypropylene (EPP) we manufacture, among other things, lightweight and highly durable tool boxes, mechanically resistant bumper and seat cores, as well as returnable packaging for transporting sensitive products. Moreover, our EPS packaging provides excellent protection for car batteries. Geographical proximity to our customers located mainly in the Czech Republic and Germany makes the deliveries fast, on time and their costs are relatively low, which allows us to present the attractive price offer.

There has been a lot of talk about the development of the Polish automotive industry in recent years. What is it about?

The Polish production plants are intensively modernizing and introducing changes in the direction of Industry 4.0, consisting in digitalization of processes and greater automation. For example, last year in the Wrocław factory we launched a new production line for expanded polypropylene (EPP) components. Thanks to the modern technologies we use, we are able to provide our customers with ready components, such as e.g. multi-component parts, whose individual elements we produce "in-house", which gives our customers a 100% guarantee of quality and conformity of the final product with the order, regardless of its complexity.

Apart from digitization and automation of production, electromobility is another main pillar of development of the automotive industry in Poland. This can be seen in the Lower Silesia region, where investments in the production of batteries for electric cars are increasing.

What was the impact of the coronavirus epidemic on the car industry in Poland?

The most obvious effects of the pandemic would include interruption of production and restrictions on mobility, which in turn led to a significant drop in demand for new cars. Many manufacturers have also had to deal with the interruption of the supply of components due to the closure of borders and suspension of production – the car is made up of tens of thousands of different parts, the lack of any of them results in stopping the whole line. In our factory, after a month's shutdown, we continued production for customers. But we had to move from seven days of work to just five days.

Michał Matuszewski, director of the Knauf Industries factory in Wrocław.
Michał Matuszewski, director of the Knauf Industries factory in Wrocław.

Our customers also include truck manufacturers, whose future depends on the broadly defined business. If, as predicted by the OECD, the decline in world production is 20-25%, the demand for transport services and, consequently, the demand for new trucks will also decrease. Hopefully, more and more sectors of the economy will begin to revive, which will also allow the automotive industry to recover.

The Polish automotive industry is largely based on exports. What does the automotive market in Europe look like?

At present, European countries are at different stages of the epidemic, so the rate of unfreezing of individual sectors of the economies and the dynamics of demand are also different. The largest automotive customers of the Polish companies are located in Germany and the Czech Republic, whose economies are returning to normal functioning. In general, all our customers have already started up their plants, although they are producing in much smaller quantities than forecasted even before the pandemic. The biggest drops are recorded in orders for car parts from the E and higher segments, while segments A, B and C look much more promising.

How does Knauf Industries Automotive respond to customer needs during the COVID-19 epidemic?

Production and delivery to our customers is normal and we are able to accept new orders at any time. We also have sufficient production capacity to start processing orders from any manufacturer who is currently having problems with its existing suppliers. Of course, we have implemented all necessary safety rules. In our plant we use all recommended personal protective equipment - there are several places in the hall for regular hand disinfection and each employee is obliged to measure body temperature before entering the hall. In this way, we take care of the health of the crew and ensure smooth production process.

Our current and potential customers can count on uninterrupted deliveries and the security of the concluded contracts also due to our very high financial stability. We have a diversified client portfolio and we belong to the global Knauf Group, which gives us considerable independence from temporary crises, both on a local and sector-specific scale.

How do you think the automotive industry will change after the coronavirus epidemic?

At the moment, it is difficult to build any specific forecasts. The automotive industry will certainly be back in business for a long time to come. IHS Markit analyses show that the drop in car sales in Europe in 2020 could be as high as 27%, and in 2021 – 18%, compared to 2019. This largely depends on the factors already mentioned, such as the demand for cars and consumer goods more generally. To this must be added the fact that producers are still burdened with the restrictions imposed by the European Union.

The pace of development of electromobility can be expected to slow down, which will be a result of not only the depletion of automotive companies' funds for investments, but also of reduced demand for new technologies. Without the support of national governments to buy cars, the decline will be very much felt by the industry. We at Knauf Industries do not change previously planned investments. We enrich our machine park in the production plant in Wroclaw with the latest generation of equipment for the production of parts with EPP together with full monitoring of production results. We want to be ready to take on new production challenges all the time, even when the industry and the economy have stabilised for good.

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