Czech engineering: Innovation meets tradition

At G. Siempelkamp GmbH & Co. KG, a technology supplier for mechanical and plant engineering, casting, and nuclear technology from Krefeld, there was reason to celebrate last December. This is because the subsidiary Siempelkamp CZ from Blatnice was honored in Prague by the Minister of Industry and the

 deputy chairman of the parliament of the Czech Republic as one of 'Czechia's Top 100 Companies 2024'. This prestigious award, which recognizes Siempelkamp's special achievements in the areas of innovation, digitalization, material flow efficiency, and environmental compatibility, was received by only ten companies from the mechanical engineering sector. It also shows the close ties that German medium-sized companies in mechanical engineering have often maintained with their Czech partners for decades.

'There are many examples of this,' emphasizes Gerit Schulze, correspondent for Germany Trade & Invest for the Czech Republic and the Slovak Republic. 'Because in addition to 'big players' like Siemens, which operates several production sites in the Czech Republic, including in Prague, Brno, and Ostrava, and manufactures steam turbines, generators, motors, and other electrotechnical components there, or Bosch Rexroth - which produces hydraulic and automation technology in Brno - there are numerous successful German medium-sized companies on site.'

Czechia is an interesting export and procurement market

The GTAI expert mentions, for example, the Niehoff CZ machine factory, which manufactures high-tech machines for the wire and cable industry in Nymburk, Matthias Meidlinger CZ with its plant in Valašské Meziříčí, a specialist provider of machine parts, assemblies, and special machine construction, or Tox Pressotechnik with production capacities in Brno, among others, for automation technology and servo presses.

“Czechia is a country with a long tradition of mechanical engineering, which is very interesting for German companies both as an export market and as a procurement market,” states Yvonne Heidler, Western Europe/EU consultant at VDMA.

“Many of our member companies have been represented locally for a long time. Examples include ZF Friedrichshafen with several plants in Czechia focusing on the production of automotive components, Continental with significant production facilities for tires and automotive components, Schaeffler with production facilities and research centers, Kuka with branches in Czechia focusing on robotics and automation technology, Heidelberg with production facilities for printing machines, or Festo with several production and development sites.”

Important location for 'nearshoring' of supply relationships

In German machinery foreign trade, according to VDMA data, the Czech Republic ranks 11th in the export ranking in 2024 with an export volume of 5,523 million euros (-9.4 percent compared to the previous year). However, in terms of machinery imports to the Czech Republic, Germany is by far the most important supplier with 38.8 percent (Italy in second place with 7.9 percent). The main deliveries came from the areas of general air technology, drive technology, fluid pumps, valves, conveyor technology, precision tools, and agricultural technology.

On the other hand, Czech deliveries rank 4th in the import ranking of German machinery foreign trade (5,786 million euros in 2024). 'This clearly shows how strongly German companies use the Czech Republic as a procurement market for machine parts and components. As a market 'on the doorstep,' the topic of 'nearshoring' is gaining significant importance in supply relationships, even though the Czech Republic is no longer a low-wage country and the shortage of skilled workers is driving wages up,' explains Yvonne Heidler.

The Czech Republic's mechanical engineering is very export-oriented

Mechanical engineering is one of the main pillars of the Czech industry and contributes almost ten percent to the gross value added of the manufacturing industry. Three-fifths of the gross value added are achieved by machine builders controlled by foreign owners. Especially in the sectors of machine tools, automotive supply, and plant engineering, the Czech Republic is an important location for metalworking and industrial manufacturing. In addition to the Prague metropolitan area, South Moravia around Brno, as well as Plzeň, České Budějovice, Ústí nad Labem, and Liberec are regional focal points of mechanical engineering.

The Czech Republic's mechanical engineering sector is very export-oriented. Of the approximately 4,600 mechanical engineering companies in the country (including dealers and service providers), most are engaged in the manufacture of lifting and handling equipment, refrigeration and air conditioning technology, engines, turbines, pumps, and compressors.

There are also renowned specialist manufacturers for agricultural and forestry machinery, mining technology, construction machinery, food processing, and textile machinery. The Czech Republic is also strong in transport machinery (railways, trams, buses).

Russia has fallen away as an important customer

"The mechanical engineering industry in the Czech Republic is currently developing only weakly. Order intake stagnated in 2024 due to low capital investments domestically and in key sales markets such as Germany (a third of exports go there)," reports Gerit Schulze. "Furthermore, since 2022, a traditional and important customer, Russia, has fallen away."

"In general, however, the Czech economy still benefits from catch-up and recovery effects compared to Western Europe, as well as generous funding from EU funds (around 50 billion euros in the current funding period until 2030). Therefore, the economy is growing with expected GDP growth rates of 2.0 percent and 2.4 percent in 2025 and 2026, respectively, significantly faster than in Germany. However, these forecasts do not yet include possible impacts of high US tariffs against the EU.

The funding programs through EU funds mainly concern the national recovery plan with a focus on digital transformation, R&D, innovation, energy security, the cohesion fund, which targets innovations, R&D in companies, digital technologies, and SMEs, and the EU modernization fund: primarily for measures to decarbonize the industry,” Schulze further states.

Energy industry as a growth market

The Czech economy is growing particularly well in areas that benefit from private consumption. This is also true for the construction industry, which is expected to see growing demand for construction machinery. Public investments in infrastructure also provide momentum. From 2025, the Czech Republic plans to build a high-speed rail network and expand the highway network.

“A growth market is the energy industry. Thanks to EU funding, including from the modernization fund, municipalities and companies are investing in energy efficiency measures (especially PV modules for their own electricity generation and battery storage),” continues the GTAI expert.

The Czech Republic's largest single investment in the coming years will be the expansion of the nuclear power plant in Dukovany by one to two blocks, which is expected to cost around 16 billion euros. The contract was awarded to the Korean company KHNP, which promises lucrative orders to Czech machinery manufacturers. New pumped storage power plants are also planned to cushion production and consumption peaks in the electricity industry.

Special economic boom in regions affected by flooding

In recent quarters, the Czech pharmaceutical industry, electronics industry, and vehicle manufacturing have recorded high order increases. These sectors are driving new machinery orders. The Czech automotive industry is transitioning to electromobility. Additionally, the dramatic shortage of personnel is creating high pressure for automation.

“A special economic boom is expected in the regions affected by the flooding in September 2024,” adds Yvonne Heidler from VDMA. “The government plans to provide at least two

 billion euros for reconstruction, including EU funds. The government expects gross fixed capital investments to increase by over three percent annually over the next three years. Larger projects are expected in the semiconductor industry (Onsemi factory expansion), in the energy sector (storage, new nuclear reactors, hydrogen), and in infrastructure expansion (new highway sections, high-speed network).”

Numerous companies produce locally

Many international companies have production facilities in the Czech Republic. In the automotive industry, numerous global players have assembly plants on site, including Škoda Auto, part of the Volkswagen Group, which holds a dominant market position. Additionally, vehicles of the Toyota brand are produced in Kolin, Czech Republic, and Hyundai vehicles in Nošovice.

"The leading group of Czech machine builders includes holdings that were spun off from the Škoda conglomerate during privatization: the turbine producer Doosan Škoda Power, the nuclear power plant supplier Škoda JS, and the energy plant builder Škoda Praha. In addition, foreign companies such as Siemens, Alstom (power plant equipment), or Daikin and Denso (heating and air conditioning technology) have production facilities in the country," explains GTAI correspondent Schulze.

Among the leading mechanical engineering companies is also the largest Czech agricultural machinery manufacturer and significant supplier for commercial vehicle and agricultural machinery manufacturers, the company Agrostroj Pelhřimov with nearly 3,000 employees.

In 2021, Agrostroj acquired the German agricultural machinery manufacturer Wilhelm Stoll Maschinenfabrik. In 2024, the company announced the construction of a factory in the USA for around 100 million euros.

Based in Brno, Zetor Tractors also produces tractors and agricultural machines (for example, combine harvesters, plows) and exports about 86 percent of its production, particularly to Germany, Poland, and the United Kingdom. The company was founded in 1946 and has sold over 1.3 million tractors.

Tatra Trucks, one of the oldest truck manufacturers in the world and formerly a leading manufacturer of military vehicles, still produces heavy-duty transporters, special and military vehicles, off-road and all-terrain vehicles, special vehicles for mining and the construction industry in Kopřivnice.

In the energy and heating technology sector, the company TEDOM, with approximately 500 employees, is worth mentioning. The company specializes in the development and production of gas-powered combined heat and power plants, gas heat pumps, and combustion engines. TEDOM has established itself as a significant provider in the field of decentralized energy supply, achieved a revenue of 8 billion CZK in 2024, and is active in over 40 countries worldwide.

With about 2,000 employees, the company ČZ a.s. in Strakonice mainly produces components for the automotive industry, including turbochargers, castings, and machine tools.

Sustainability is a top priority

The Škoda Group from Plzeň, which specializes in drive technology and rail vehicles, has acquired the Belgian technology company The Signalling Company. It develops software solutions for safety systems and autonomous driving in rail transport. Additionally, Škoda Group took over the French supplier Cegelec in 2024.

In Varnsdorf (North Bohemia), TOS Varnsdorf a.s. produces milling machines, boring machines, and machining centers. The globally active company manufactures extremely precise machines for large workpieces (for example, energy plants, shipbuilding).

“According to the World Robotics 2024 report, the Czech Republic has the highest annual installation volume of new industrial robots in Central and Eastern Europe (around 2,700 per year, similar to Austria and Switzerland, more than the Netherlands),” reports Gerit Schulze from GTAI.

In collaboration with international robotics manufacturers like ABB, Fanuc, Kuka, or Universal Robots, more and more automated solutions are being implemented. For example, Škoda Auto uses collaborative robots (cobots) on a large scale for welding, assembly, and painting. Companies like TOS Varnsdorf integrate robotics into the machining processes of their CNC machines. Additionally, there are numerous robotics startups and research projects in the Czech Republic. Research institutes like the Czech Technical University (ČVUT) develop advanced robotic systems, for example, for precise inspections or adaptive manufacturing or the use of automated guided vehicles (AGVs) in factories to move materials between stations.

Sustainability is also a central topic in Czech mechanical engineering, actively promoted by numerous companies. For example, Škoda Auto's component plant in Vrchlabí has been CO₂-neutral since the end of 2020. This was achieved through the use of 90 percent renewable electricity, the use of biogas, and effective energy management. In addition, waste is fully recycled materially or thermally. By 2030, all three Czech plants are to produce completely CO₂-neutral.

Even today, the ZF Friedrichshafen plant in Klášterec, which manufactures electromobility components there, is climate-neutral. By installing 3,400 solar modules, using heat pumps instead of gas heaters, and utilizing free cooling technologies, CO₂ emissions have been significantly reduced. By 2040, ZF aims for climate neutrality along the entire value chain.

Agrostroj Pelhřimov continuously invests in modern and environmentally friendly production technologies. The company operates one of the largest KTL and powder coating plants in Europe, enabling resource-saving coating of components. Agrostroj is also committed to developing efficient agricultural machinery that reduces energy consumption in agriculture.

In its Czech electric motor plants in Mohelnice and Frenštát pod Radhoštěm, Siemens relies on comprehensive digitalization. By using digital twins in all phases - from product development to production - productivity has been increased, development times shortened, and manufacturing made more flexible. These measures significantly contribute to resource efficiency and sustainability.