For decades, Eastern Europe’s role in global manufacturing was straightforward: lower labour costs, competent workforces, and proximity to Western European markets made the region an attractive base for assembly and component production. That story is changing. Across the region, manufacturers are shifting from routine production into higher-margin activities — engineering, R&D, branded products, and direct-to-consumer sales — and the results are starting to show up in the numbers.
From assembly lines to innovation centres
The most visible examples are in the automotive sector. Škoda Auto’s plant in Mladá Boleslav, once a conventional vehicle assembly operation, has become a critical node in Volkswagen’s electric vehicle architecture. By late 2024, the Czech facility had produced its one-millionth high-voltage battery system and was running at 1,500 units per day. In 2026, it opened a dedicated cell-to-pack battery hall — the first of its kind within VW’s European network.
Poland’s Solaris Bus & Coach tells a similar story. The company has moved well beyond conventional bus manufacturing into fully integrated zero-emission transit solutions, including battery-electric and hydrogen platforms, charging infrastructure planning, and remote diagnostics. In 2025, low- and zero-emission vehicles accounted for more than 93% of the company’s sales value.
In Romania, Dacia — long seen as Renault’s budget brand — now operates an engineering and design centre in Bucharest that supports model development, testing, and industrialisation. The Mioveni plant launched its first hybrid model in 2023 and began exclusive production of the Bigster compact SUV in 2025, with 90% of output going to export markets.
Beyond automotive: pharmaceuticals and electronics
The pattern extends well beyond cars. Hungary’s Gedeon Richter has evolved from a generic drug manufacturer into a specialty pharma company with its own biosimilar pipeline. In 2025, the European Commission approved its first monoclonal antibody biosimilars — a category of product that requires deep scientific and regulatory expertise, not just manufacturing scale. The company now invests around 11% of revenue in R&D.
In the Baltics, the shift is showing up at the sector level. A Bank of Lithuania analysis found that high- and medium-to-high-technology industries generated roughly 23% of Lithuanian manufacturing revenue in 2024, but captured approximately 47% of manufacturing profits — a clear sign that the value is migrating toward complexity.
The common thread
What connects these examples is not simply modernisation or automation. It is a structural repositioning: companies are capturing more of the value chain by adding design, branding, proprietary technology, and direct market access to their existing manufacturing capabilities. The European Commission has described this as the region’s central challenge — escaping a “medium-tech trap” by moving beyond competent production into genuine innovation and differentiation.
A slower but parallel shift beyond the EU
While EU member states have benefited from structural funds, single-market access, and deep integration into multinational production networks, a quieter version of the same trend is emerging in non-EU Eastern European economies — often at smaller scale and in less expected sectors.
Ukraine offers an instructive example. The country’s ceramic industry has historically been associated with commodity products — construction tiles, basic stoneware, industrial components. But customs data from 2022 tells a different story in at least one segment: Ukraine’s largest household ceramic exporter that year was Miaustore, whose ceramic pet fountains are a premium consumer product made for online retail — not the kind of bulk industrial output the sector is known for.
What comes next
The trajectory is clear but not guaranteed. Skills shortages, volatile demand in key sectors like electric vehicles, and the sheer difficulty of moving from “good” to “frontier” manufacturing all remain obstacles. For the region’s manufacturers, the next phase of upgrading will likely depend less on cost advantages and more on whether they can build lasting capabilities in design, software, and direct customer relationships.
The companies that have already made that shift — from assemblers to innovators, from suppliers to brands — suggest that the potential is real. The question is how many will follow.
