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Why is Magna Steyr coming to Slovenia?

The construction of Magna Steyr’s new paint shop in Slovenia could be the first phase in its expansion into Slovenia, driven by an increasing demand. The changing conditions on the car market and the switch to electric, hybrid or even self-driving vehicles could open further opportunities for the world’s only high-quality contract car manufacturer.

Why is Magna Steyr coming to Slovenia?

The construction of Magna Steyr's new paint shop in Hoče near Maribor in northeasternSlovenia in October could be more important than it appears at first sight. The new plant will employ around 400 people and will complement Magna Steyr's production in Graz. The number of new jobs and the total value of investment (around 86 million euros) is important for Slovenia, in particular for its northeastern region which has above average unemployment.  Yet even more important is the new plant's strategic value and potential. The modest start could evolve into the largest greenfield investment in Slovenia since its independence.

 

The Slovenian government’s decision to support the investment with a subsidy of 18.6 million euros requires Magna to employ at least 1,000 people and invest over 100 million euros overall in the next five years. During negotiations Magma presented plans to invest an overall 1.2 billion euros in its new Hoče production as well as create over 6,000 jobs. The new paint shop is only the first of four development phases. The second phase is the construction of a new car part production plant and car assembly lines employing 1,500 people. The third and the fourth phases include further expansion of the production lines as well as a second paint shop. They are expected to create 1,430 and 2,670 new jobs respectively. 

 

Günther Apfalter, President of Magna International Europe & Magna Steyr, is reluctant to comment on these plans. The present expansion of Magna Steyr’s operations is based on increased demand. The factory in Graz currently builds Mercedes Benz G Class SUVs, Mini Countrymen and BMW’s 5 series. The company is preparing to produce Jaguar SUVs and the new model of Land Rover in 2018. The Graz plant will employ 3,000 new workers in the next months due to the deal with Tata Motors, owner the of Jaguar and Land Rover brands. Yet in a 2016 interview for German magazine Automobil Produktion, Apfalter said that the Graz factory may hit its maximum production capacity by the end of 2018. 

 

Magna Steyr holds a unique position in the automotive industry. It is part of Canadian owned Magna International Group, the world’s third largest car parts manufacturer. Yet Magna Steyr does not only produce parts, it makes complete vehicles for big car brands. It is the world’s only high-quality contract car manufacturer with decades of experience and an ability to produce internal combustion, hybrid and electric vehicles. According to Motley Fool, a multimedia financial-services company, this could lead to a sharp increase in demand for Magna Steyr’s services in the coming years, as companies like Apple and Alphabet contemplate various ways to enter the auto business. “For companies that want a high-quality contract manufacturer for vehicles, Magna Steyr is (right now at least) the only game in town. Hints that it will soon invest the considerable sums needed for a second factory suggest that it knows a lot of new business is on the way,” wrote Motley Fool’s analysts.   

 

Magna Steyr considered various locations in Europe, North America and China before choosing Slovenia as a location for its new plant. The automotive industry is a locomotive powering Slovenia’s exports. The nation has many developers and producers of both electrical motors and various electromechanical components, essential parts for electric and hybrid cars. 

 

The location in Hoče near Maribor is well chosen: it is only 75 kilometers away from the Graz plant, connected by both road and railway and near Maribor’s international airport as well as an important motorway junction. The plant in Graz is relatively close to the border and already employs many workers from Slovenia. And it is not only proximity: Slovenia has a lot of workers that have the relatively high level of expertise needed in the car industry. The work culture in Austria and Slovenia is also not dissimilar. Both nations were closely connected for a thousand years within the Habsburg empire. 

 

This closeness was also a factor in the creation of the company that eventually led to Magna Styer : one of the pioneers of the car industry in Graz was Johann Puch, founder of the Puch company. He was a Slovenian, born near Ptuj in Slovenian part of Styria. The Puch company later merged with Steyr and Daimler, two other Graz based motor companies. In 1998 the conglomerate was taken over by Magna International. The Canadian based group employs over 160,000 people and runs over 200 production facilities all over the globe. The company’s sales in 2016 exceeded 31 billion euros. 

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