Slovenian Gear Maker KLS Ljubno Rebuilds After Floods While Fighting Chinese Price Squeeze

How a Flood Stopped Europe's Leading Gear-Ring Supplier

KLS Ljubno, a Slovenian manufacturer of gear rings for car engines and electric drive systems, lost virtually everything in August 2023 when floods swept through its plant in Ljubno ob Savinji. The water carried about 12,000 cubic metres of mud and debris into the facility, forcing a full production stop at a supplier that then held roughly 80% of the European gear-ring market.

The halt rippled through the industry quickly. In late summer 2023, Volkswagen, Škoda, Renault and Seat suspended production lines because they could not get KLS parts. Director Samo Mirnik says uncertainty over when—or whether—the plant would return lasted about two weeks and later proved decisive in losing some orders to other suppliers around the world.

KLS restarted lines in small volumes in October 2023 and reached about 70–80% of pre-flood capacity by the end of that year. But the business recovery has been slower than the production recovery: revenue in 2024 was €42 million, about a third below 2022, and last year was similar in value even though the company sold 5% more by volume because it cut prices to stay competitive.

Today Mirnik describes two main obstacles—Europe's high cost base and low productivity, and Chinese competition supported by state backing. KLS also wants to move its most sensitive production to a safer location, but the municipal planning process has delayed construction, with a public hearing now expected in autumn.

Why KLS Ljubno's Recovery Is a Test of European Auto-Supply Chain Viability

KLS Ljubno's Position Is Stronger Than Its Sales Suggest

Before the flood KLS supplied gear rings used in engines of more than 30 major car brands and held 80% of the European market. That concentration explains why temporary lost orders did not erase the company: Mirnik says long-standing relationships and customer trust built before the disaster are now helping win business back. The interpretation here is that KLS has a strategic customer-relationship asset, but revenue is still recovering more slowly than physical capacity because buyers had to qualify and retain alternative suppliers during the outage.

China's Export Push Turns European Overcapacity Into a Pricing Problem

Mirnik argues Chinese competition is not purely a story of superior technology. He says China has had a domestic dumping problem since 2023, with passenger vehicle sales falling for seven consecutive months and capacity utilization at only 45%, even as Europe's auto industry ran at 55%. The article cites CPCA data reported by Reuters showing Chinese passenger vehicle sales fell by about 2.65 million units in the first seven months of the year, while exports rose 88.2% to 923,000 vehicles. Most of those exports head to Europe and South America. If those figures hold, European suppliers are absorbing Chinese overcapacity as price pressure, which fits Mirnik's account of having to cut prices despite higher volumes. The same pressure has reached the top of the supply chain: Volkswagen has proposed cutting 100,000 German jobs and closing four plants.

Productivity and Permitting Are the Internal Handicaps

KLS also faces what Mirnik frames as a European competitiveness problem: more expensive steel and energy, higher unit labour costs and insufficient productivity growth. His example is procedural: the company originally aimed to build a safer new facility by the end of 2024, but it first needs a change to the municipal detailed spatial plan. A public hearing is now expected only in autumn. Mirnik says this is not a lack of state engagement—Slovenia allocated €24 million of the more than €100 million damage—but a sign that approval processes have become more complex over the years.

What Auto Suppliers and Buyers Can Take From KLS Ljubno's Rebuild

• For European auto OEMs and tier-1 buyers, KLS's 80% pre-flood market share shows the risk of single-location supply: the plant outage contributed to production stops at Volkswagen, Škoda, Renault and Seat in late summer 2023, so buyers should verify secondary sourcing for gear rings.
• Suppliers facing Chinese export pressure should note the numbers Mirnik cites: China's first-seven-months passenger vehicle sales fell by about 2.65 million units while exports rose 88.2% to 923,000 vehicles, most heading to Europe and South America—meaning European pricing pressure is likely to persist rather than fade.
• For KLS and similar manufacturers, the bottleneck is not only demand but permitting: the OPPN municipal plan change needed before building a safer production site is not expected to reach public consultation until autumn, so relocation-related flood resilience remains delayed.
• With KLS selling 5% more volume but roughly similar revenue last year, margin recovery depends on the new generation of electric vehicle drive gears developed under a European project and on regaining pre-flood customer volumes this year.