Foreign investments Poland: Mercedes enters the country

After months of negotiations, speculations have become fact: Daimler AG has announced that it plans to invest more than 500 million euro in Poland. The engine plant built with this money will be the company’s first premium class engine production plant located outside of Germany.

A production plant with an area of 422 hectares will be built in the municipalities of Jawor and Męcinka in the Lower Silesian Special Economic Zone – S3 Jawor (DSAG – S3), a part of the Legnica Special Economic Zone. The zone, created last year and comprising in total 460 hectares, right from the start has been the object of interest of investors from the automotive sector. In 2015, plans were already announced for the construction of an automotive plant in the zone by the Indian company TATA, the producer of the Land Rover and Jaguar brands. Discussions between the investor and the Polish side however reached an impasse – the cause being excessively high expectations on the part of TATA regarding state subsidies. Now the Indian giant’s place has been taken by an equally heavy hitter in the automotive sector; last year alone, Daimler sold more than 2 million vehicles worldwide, including nearly 10,000 in Poland itself.

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More than just one-off benefits

Record sales and high turnover for the company are good news for Poland; they mean that Daimler will be eager to complete the investment on schedule to quickly maximize production capacity. According to plans, the new plant is to be opened in 2019, and should reach full production capacity less than a year later. The plant will likely employ several hundred people, though some sources quote figures as high as 1500 employees. The production profile will include four-cylinder gasoline and diesel engines for different Mercedes-Benz models, from A-class compact cars to S-class limousines. The company expects to be manufacturing several hundred thousand engines of these types annually by 2020.

Daimler’s decision is good news not only for local Jawor authorities, but also for the national government. For Jawor, it means a real improvement in the local labour market, and increased competitiveness for the region at the national level (at the end of 2015, unemployment reached 17% in Jawor, a town with 20,000 inhabitants, compared to 8.6% for the province). And for national authorities, it means the chance of further Daimler investments in the country. The planned factory is, after all, the first Daimler premium class engine plant located outside of Germany, and as such will be a sort of litmus test for the company’s future investment plans, which include the construction in East-Central Europe of another factory, this time for passenger cars. And although the planned location of this factory is believed to be in Russia, it can’t be ruled out that effective collaboration between the company and national and regional authorities in Poland could change those plans.

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