CEE region key for automotive R&D, says McKinsey

In the battle between automotive leaders to implement new technologies, central and eastern Europe (CEE) could boost competitiveness, according to research by McKinsey.

With software development in the automotive industry expected to grow by 13% over the next five years, CEE offers important advantages to automakers vying to be at the forefront of developments such as autonomous driving, vehicle connectivity and electrification. 

The number of unfilled positions in the information and communications technology area rose by 43% between 2016 and 2018, said Andreas Tschiesner, a senior partner at McKinsey and European leader of its automotive practice. “Carmakers now compete vigorously with hi-tech companies to be the emerging leaders in the future of mobility,” he says. “The competition for highly-skilled workers is heating up.”  

A study of the competitiveness of 32 European countries as a location for an automotive R&D centre, undertaken on fDi Benchmark, an investment destination comparison tool, found eight out of the top 10 countries were in CEE. While Germany and the UK ranked first and second in terms of quality, the top 10 countries for cost were all in CEE.

McKinsey says CEE offers advantages in developing automotive R&D, including maturity of the industry, an available talent pool, well-developed infrastructure, competitive wages and government support. The relevant talent pool in CEE is only 10% to 15% smaller than that of Germany (6.6 million versus 8.0 million), and there is less competition, with fewer global engineering and IT companies in the region.

Greenfield investment monitor fDi Markets has tracked 2498 greenfield FDI projects in the automotive original equipment manufacturer and component sectors in CEE since 2003. Western Europe attracted 23% fewer projects in this period.

“Developing R&D in CEE will benefit European automakers and the region as a whole,” said András Kadocsa, partner at McKinsey and CEE leader of its advanced industries practice. “A larger automotive R&D ecosystem in CEE will support a talent pipeline, strengthen the overall R&D ecosystem and make the region even more attractive to other advanced sectors, such as machinery, robotics and aerospace.”  

The report advises automakers to take this process to the executive level to identify appropriate R&D opportunities in the CEE region, select suitable locations and initiate set-up of operations. Equally, CEE countries could assist by strengthening geographic clusters and stimulating partnerships between academic, commercial, social and public institutions, said the report.