Volkswagen shift cuts in Slovakia add to auto fears in 'Detroit of Europe'

WATCH: Pablo Gutierrez reports from Bratislava on their auto industry worries

Volkswagen's recent decision to reduce production shifts in Slovakia is raising alarm in the automotive sector, a crucial component of the nation's economy. 

As the world's leader in vehicle production per capita, Slovakia is dubbed 'Detroit of Europe.' Yet its reliance on automotive exports, especially SUVs produced by Volkswagen, has made the country acutely vulnerable to shifts in the global car market. 

As the European auto industry grapples with slow electric vehicle (EV) sales and increasing competition, concerns are mounting about the wider implications for Slovakia's economic stability.

Slovakia's automotive industry accounts for 13 percent of its GDP and more than half of its industrial production, employing hundreds of thousands. 

Volkswagen is the country's largest private employer and deeply intertwined with the local economy, making its decisions impactful far beyond the factory floor. 

"Volkswagen is the largest corporation in the country and one of the largest taxpayers," explained Tomas Dudas, Dean of the Faculty of Economics and Business at Pan-European University. "If something (bad) happens, it has economic consequences for the whole economy."

The decision to cut production shifts comes hot on the heels of Volkswagen's announcement to close three factories in Germany and cut thousands of jobs as the company struggles with declining EV sales across Europe. 

The transition to electric vehicles, once anticipated to drive the sector's growth, has faced slower-than-expected uptake. Jaroslav Holecek, a former VW executive, attributed the sluggish sales to a range of factors, including EU mandates and infrastructure shortfalls. 

"Electric cars are not sold like everybody thought they would be," said Holecek. "The problem is the infrastructure and countries are not prepared for the electric car."

Since the EU set a 2035 deadline to end the sale of new CO2-emitting vehicles, automakers have ramped up EV production in the hope of capturing a burgeoning market. However, recent data suggests that consumer demand is lagging, with new vehicle registrations dropping by close to three million across Europe. 

The slow pace of EV adoption, combined with limited charging infrastructure, has created a challenging environment for automakers.

For Slovakia, which led Central Europe in vehicle exports to China last year, these global pressures hit close to home. SUVs manufactured at Volkswagen's Slovak plants account for 78 percent of the country's vehicle exports, underscoring the industry's economic importance.

Trade unions are already voicing concerns over further production cuts, and Volkswagen Slovakia recently acknowledged that production volumes are dependent on "customer demand and supply chain conditions."

To complicate matters, the EU's recent tariffs on Chinese electric vehicles have introduced another layer of uncertainty. As Tomas Dudas notes, Slovakia could become collateral damage if geopolitical tensions escalate, with Chinese retaliation potentially targeting countries like Slovakia that produce large-engine vehicles.

For now, Slovakia's automotive sector is at a crossroads, with workers and industry leaders anxiously awaiting the next steps by Volkswagen and other manufacturers.