Zetor Tractors informed trade unions and the Labour Office on Friday that it is ending tractor production at its Brno facility. The decision will affect 33 manufacturing positions. This does not change this year's production plan, and the company will complete all tractors currently in production as well as all contracted orders over the coming months. The notice periods will expire by the end of the year.
Brno will continue to serve as the headquarters of Zetor's global operations. The company's development centre will remain in Brno and will continue to expand in response to demand for new models. It is currently developing two tractor models that will be manufactured in India, one of which will also be launched on the European market next year. At the same time, the current R&D team is also involved in the development of the Zetor 6×6 military vehicle.
The company's spare parts business for Zetor tractors is also growing in Brno, while the European distribution centre for spare parts and tractors will remain there as well. In addition to providing full support for existing customers, the Brno headquarters will continue to manage the company's global sales, marketing and financial operations.
"Manufacturing small and medium-sized tractors in Europe no longer makes economic sense under the current conditions. We were the last tractor manufacturer trying to keep this production in Europe, but due to high energy prices, labour costs and, above all, material costs, we are no longer as competitive as we need to be, and we must change the way we operate. This does not mean we are abandoning this tractor segment; like all our competitors, we simply will no longer manufacture it in Europe," explains Róbert Harman, CEO of Zetor Tractors.
The main reason is the long-term increase in material costs. Prices of steel, plastics, aluminium and energy for European tractor manufacturers have steadily increased in recent years, while the selling prices of finished tractors have remained at similar levels due to market decline and strong competition. Under these conditions, manufacturing tractors up to 130 HP in Europe has become economically unsustainable across the industry. Zetor is no exception and is now the last remaining manufacturer in Europe producing tractors in this category.
The cost difference is significant. Materials in India and China are approximately 30–35% cheaper, resulting in savings of at least 25–30% in the final tractor price, making it impossible for European production to compete. Zetor's key suppliers – Western European manufacturers of front axles, transmissions, engines and hydraulic systems for small and medium-sized tractors – relocated their production to Asia years ago. Importing individual components back to Europe for final assembly therefore no longer makes economic sense. In addition, both serial production and the launch of new products can be completed in China approximately twice as fast as in Europe, thanks to a highly developed supplier network and the fast-paced work of local engineers. This shift away from European manufacturing is now affecting virtually the entire engineering industry, not only tractor production.
Brno remains the headquarters and global centre of Zetor. The company will continue to develop its engineering, sales and service operations there, including the sales, assembly and logistics of spare parts for tractors previously sold to customers. Zetor will continue to offer tractors for the European market, but production will take place in manufacturing facilities outside Europe. Alongside its successful Indian project, Zetor India, a joint venture with VST, the company is also seeking a manufacturing partner in China and preparing its own production plant in Asia to ensure greater independence in manufacturing.
"The European market for tractors up to 130 HP has fundamentally changed over the past few years, and Zetor must accept this reality, just as all of our global competitors have done. Zetor cannot subsidise production in Europe. We must manufacture where we can generate profits and invest in further development. We have to make this transformation if we want to remain competitive. Zetor continues in Brno, and this change should also accelerate the development of our product portfolio for the European market. We are growing internationally, particularly in developing, non-emission-regulated markets across Africa, Latin America and Asia. Brno will continue to manage the sales and distribution of spare parts, where we also expect further growth in the coming years. These are the segments on which Zetor intends to build its future," comments Róbert Harman.
While manufacturing in Europe has become inefficient for Zetor in recent years, the company's international business continues to grow. This is particularly evident in the project focused on tractors for non-emission-regulated markets, where revenues are increasing by 30–50% every year. Thanks to this growth, Zetor's tractor sales exceeded 1,500 units last year. The company intends to build its future on this continued expansion.
"Our goal is to export approximately 5,000 tractors from India within the next five years. The same target applies to China. Zetor is moving closer to the suppliers of key components in order to become more efficient while also accelerating the expansion of its product portfolio. Brno remains our centre thanks to its historical background, universities and talented young people, whom we expect to play an important role in our future expansion. This trend can now be seen across Europe, where high production costs have made traditional engineering industries less competitive, as demonstrated by developments in the automotive sector. Just as it has done for the past 80 years, Zetor will continue to deliver reliable, robust and durable tractors to customers around the world, including our domestic markets. We are retaining key components from proven suppliers that our customers have trusted for many years and which guarantee product quality. These include Carraro front axles, Carraro and ZF transmissions, Mita hydraulics, Fritzmeier cabs, and Deutz and Cummins engines for the European market. These components are already being manufactured in Asia with lower material costs, and relocating the entire tractor production closer to these key suppliers enables us to remain competitive in European markets, achieve profitability and generate resources for the further development of the Zetor brand," adds Róbert Harman.