Hyundai-Kia Automotive Group in Czech Republic and Slovakia: Global Value Chain Perspective in Search of Competitiveness Strategy in Europe

Central European countries integrated during the 1990s with Western European economies’ global value chains in the auto industry. This created a certain form of regional interdependence. For instance, Volkswagen Group from Germany was one of the first auto makers which stroke a Joint Venture deal with Central European car manufacturer – shares of Skoda from former Czechoslovakia were sold to Volkswagen Group in 1991, whereas by 1995, the German company owned 70 % of Skoda. The EU integration of Central European economies through the 1990s and early 2000s meant also that trade regulations and restrictions were gradually phased out for the EU market. That is how, Japanese and Korean auto producers, who targeted the EU market, were disadvantaged vis-à-vis German, French and Italian manufacturers who had their auto plant facilities and suppliers already located in these emerging economies, benefiting from low-cost factors and government incentives. After the full EU integration of Central European countries in 2004 Korean manufacturers took a strategic decision – major multi-billion USD green-field investments were targeted by KIA Motors Corporation and Hyundai Motor Group in Slovakia and Czech Republic, respectively. This paper aims to understand the complexity of relationships in the global value chain of Korean Hyundai-KIA Automotive Group, which became the fifth largest vehicle manufacturer in the world, in Central Europe in order to derive lessons for their competitiveness strategy in Europe. Interviews with company representatives, government officials and experts, as well as analysis of primary and secondary sources will complement the research findings. The paper will also attempt to provide answers to questions, like how emerging economies create the necessary conditions to attract foreign direct investments in the auto industry and also whether government programs in cooperation with business associations’ activities can increase innovation and technological capability in the domestic auto industry through spill-over effects.