Economic headwinds shake CEE automotive logistics as cost pressures, nearshoring, and geopolitical shifts reshape supply chains

Over the past decades, the CEE region has firmly established itself as a highly efficient automotive manufacturing hub. Although the production dynamics in the post-COVID era were mixed, in 2022, the region surpassed Germany in finished vehicle production.

In 2024, the production performance of the automotive industry varied drastically across the region. For example, the Czech Republic saw its finished vehicle production climb by 3.9% compared with the previous year to 1.45 million units, an all-time high, as revealed by the Czech Automotive Industry Association.

Slovakia, the world’s largest finished vehicle producer per capita, on the contrary, saw its output declining to 993,000, down by 87,000 compared with the previous year. Poland fared much worse, experiencing a 28% decline to 216,000 finished vehicles.

Several factors contributed to such discouraging results; market players believe.

“For me, there were two biggest issues,” commented Krzysztof Szeligowski, chief sales officer of FVL at vehicle logistics firm Adampol. “The first is massively dropping sales at the EV market, as EU tariffs on Chinese brands and countersanction of Chinese government led to a decline in sales of European brands.”

“The second issue was sales backlog coupled with finished vehicle overproduction in 2023,” Szeligowski said, explaining that OEMs rushed to ramp up production, hoping for a corresponding surge in demand, but as the market demand failed to catch up, the output plummeted in 2024.

For years, the CEE region was an assembly hall and the key components supplier for the European automotive industry. The current challenges also take a toll on the production of automotive components in the region. 

“The Central European region is heavily dependent on the German automotive industry,” commented Pal Negyesi, director of CE Auto, a Vienna-based consultancy. “As the German industry is suffering, it is hurting CEE,” he said, citing recent worrying news, including that the Volkswagen plans cut production in Germany and reduce staff across factories.

However, the problems of the CEE region are not only about foreign trade. The business environment in Slovakia, the Czech Republic and Hungary has also undergone tremendous changes over the past few years.

“The former attractiveness of the CEE region was its cost advantage. This is disappearing, partly because it is not that cheap anymore, and partly because of the costs of logistics, the costs of energy plus newly emerging production technologies balance this out,” Negyesi pointed out.

Fears associated with the CEE region’s competitiveness have sparked with the onset of the energy crisis in 2022, which is yet to loosen its grip.

“Rising inflation and energy costs have remained critical concerns in the [CEE] region,” Andrew Austin, chief quality officer, Priority Freight said.

OEMs are increasingly looking at all areas for efficiencies and cost savings, but for the CEE region energy has become a particularly pressing issue.

“These factors have contributed to increased production expenses, particularly in energy-intensive sectors like automotive manufacturing. Such economic pressures also impact consumer purchasing power, influencing demand for both vehicles and related services. Manufacturers have had to adjust their strategies to mitigate these effects, often by rethinking pricing, sourcing, and logistics,” Austin stated.

Bracing for the impact

As the economic and geopolitical landscape remains challenging, the CEE region is braced for another difficult year.

“2025 will probably be even worse [for the automotive industry in the CEE region] as Chinese OEMs are expanding, Trump is wreaking havoc with tariffs, and the markets are still not recovering,” CE Auto’s Negyesi noted.

Trump’s new tariffs will hurt those countries where American-bound cars are produced, like the Land Rover and Volkswagen plants in Slovakia and their suppliers, Negyesi added.

“Prediction is rather pessimistic as sales forecasts in Europe are on the downward trajectory,” Adampol’s Szeligowski noted. “Since the fourth quarter of 2024, there was a big fight for long-term contracts for volumes towards the east, as sales in the region remain stable-low. And carriers will face other challenges than capacity.” 

“The region’s ability to embrace this change is crucial for its competitive edge in the global automotive market,” - Andrew Austin, Priority Freight

Among those challenges, Szeligowski warned about the potential impact of the ESG factors, explaining that facing carbon emissions fees, OEMs will push their suppliers to reduce emissions throughout the supply chain, which will trigger the deep sector’s transformation. One of the most recent examples of such efforts is BMW’s plan to reduce its overall carbon emissions by 40% by 2030 compared to 2019 levels.

“The evolving regulatory landscape also includes changes in legislation surrounding HGVs and LGVs, especially in relation to European mobility packages. New rules concerning driver working hours, rest periods, and cross-border transport could lead to changes in how automotive parts and vehicles are transported across Europe,” Priority Freight’s Austin said.

On the bright side, some countries in the CEE regions are ahead of the curve of the EV transition. 

“Countries like Poland and Slovakia have been at the forefront of this shift, with significant investments being made into EV manufacturing plants and the development of the necessary charging infrastructure. The region’s ability to embrace this change is crucial for its competitive edge in the global automotive market,” Austin added.

Among all CEE countries, Hungary stands out when it comes to strategies for automotive industry development.

As pointed out by Negyesi, while Europe imposed the anti-dumping tariffs against Chinese EVs, Hungary “rolled a red carpet” out to the Chinese and Korean finished vehicle manufacturers. For example, BYD, China’s biggest EV maker, has rolled out plans to build an assembly plant in Hungary, the first plant of its kind to be built by a Chinese carmaker in Europe.

This approach seemingly pays off as the country has managed to attract substantial investments and is eyeing a role as the gateway for the Chinese OEMs to the European market.

“However, a slowdown in electric car sales had a negative effect on the whole supplier chain, so part of Hungary’s problems stems from this,” Negyesi noted.

Amid rising volumes, the insufficiently developed infrastructure in Hungary will be the biggest challenge for logistics providers in the CEE region in the foreseeable future, Szeligowski said. He added that the key problem is that the only highway spanning the eastern and western parts of the country is heavily overloaded. In addition, he added, railway and even river infrastructure on the Danube are also overburdened.

Time to adapt

However, despite the turbulence, the mood in the automotive logistics industry in the CEE region is far from the lowest ebb.

“Overall, 2024 was a stable year for the sector, with relatively steady volumes, including for our members in the CEE region,” commented Andreea Serbu, senior manager at the Association of European Vehicle Logistics.

Since the logistics sector is directly dependent on finished vehicle manufacturers, this new volume reality will require logistics providers to adapt accordingly, she noted.

“Key challenges for 2025 include capacity management, cost pressures due to inflation and energy prices, and the need to align with evolving regulatory and sustainability requirements,” Serbu said.

In response to the challenges, logistics providers embark on different business development plans.

“Overall, we see a mix of strategies among market players. Some adopt a more cautious approach, carefully assessing their investments, while others actively explore new opportunities to adapt to the evolving landscape. Key trends include increased interest in digitalisation, sustainability initiatives, and adjustments in supply chain strategies to mitigate risks. The industry is facing a period of transformation, and flexibility will be crucial in determining long-term success,” Serbu said.

Hödlmayr’s business in the CEE region generally performed well in 2024. Compared to 2023, the company benefited from largely stable volumes, following a similar or slightly upward trend, commented Andreas Sundl, COO of Hödlmayr International.

Aside from the EV transition, among the factors impacting operations in 2024, Sundl mentioned rerouted logistics flows due to the geopolitical impact of the Ukraine conflict and challenges in railway infrastructure impacting logistics efficiency.

“Investments in rail and transport systems [in the CEE region] are ongoing but will take time,” Sundl said. 

In general, however, Hödlmayr remains optimistic about the opportunities offered by the CEE region.

The CEE region is driven by growing investments in EV manufacturing and supply chain digitalisation. This focus on electrification and innovation is accelerating the region’s role in the European automotive landscape, Sundl emphasised.

“The shift in production to the CEE region will increase demand for inbound logistics and finished vehicle transport,” Sundl said. Additionally, trade patterns are evolving, with rising imports of Chinese EVs potentially altering traditional cargo flows, while local EV production in Europe may reduce reliance on imports.

“These trends highlight a complex interplay of innovation, regulation, and shifting consumer behaviour, which will reshape both production and logistics across Europe and the CEE region,” Sundl said.

Supply chain optimisation through investments in digitalisation called to enhance visibility and efficiency across supply chains will be the key trend for the logistics providers in the CEE region in the coming years, Priority Freight’s Austin is confident.

“In the CEE region, this digital shift will likely streamline the movement of automotive parts and components, making cargo flows more efficient. Companies will also be looking to diversify their supplier networks to reduce reliance on single sources, which may result in more complex logistics patterns,” Austin added.

Additional work will need to be done due to the launch of new production facilities in the CEE region, which inevitably leads to shifts in trade flows and can result in imbalances and increased logistics costs. 

“Such changes require careful planning and adaptation from logistics providers, particularly in optimising transport routes and ensuring sufficient capacity in both directions. Collaboration across the supply chain will be key to mitigating potential disruptions and ensuring efficiency in vehicle distribution across the region,” Serbu said.