2009-10-27 03:21:02 - Slovakia Autos Report Q1 2009 - a new market research report on companiesandmarkets.com

www.companiesandmarkets.com/Summary-Market-Report/slovakia-autos ..

Despite recent capacity expansion, Slovakian automotive production is set to decline in 2009 as the industry faces tough market conditions, according to BMI’s latest Slovakia Automotives Report. BMI believes that the Slovakian automotive industry will operate below capacity in 2009 as a result of the downturn in export markets. We forecast a 2.9% fall in output in 2009 to 821,172

units, but a recovery over the rest of the forecast period with higher rates of capacity utilisation. By 2013, output will exceed 946,000 units, a 10.6% increase over levels achieved in 2008.

The decline in demand from key export markets will have differing impacts on producers. While PSA Peugeot Citroen and Kia are ramping up capacity, Volkswagen (VW) announced in October 2008 that it was cutting production and work hours in response to falling demand for expensive, premium SUVs.

Production at its Slovakian plant, which builds the VW Touareg, Porsche Cayenne and Audi Q7, was cut back by at least 10% in Q408. However, VW could improve margins by utilising surplus capacity to transfer production from Spain to Slovakia, taking advantage of low wages and high productivity.

The Slovakian automotive market is also not expected to escape the effects of the international financial crisis, with the double-digit growth rates seen in 2008 expected to come to an end. In the first 10 months of 2008, passenger car sales rose 19.7% y-o-y to 58,858 units and light commercial vehicle sales rose 15.8% y-o-y to 22,197 units. Growth in 2008 was strong despite the global credit crunch, with the Slovakian economy growing at a faster pace than regional peers. BMI estimates that total automotive sales rose by 17.1% y-o-y to 104,277 units in 2008, with a sharp slowdown in sales growth in Q408. At the same time, BMI has witnessed an increasingly competitive outlook to the Slovakian car market, with Skoda’s lead continually coming under pressure.

Although car sales growth is expected to be sustained over the next five years, it will be at a lower rate than BMI previously forecast. While car loans have become harder to obtain as a result of the global financial crisis, the Slovakian banking sector is far less leveraged than other markets in the region with far less foreign currency lending, ensuring that a decline in the market will be averted. Nevertheless, growth will decline in line with the expected fall in GDP growth. We have revised our 2009 forecast to 2.6%, down from our previous forecast of 6.5%, with car sales at over 71,700 units and commercial vehicle sales over 35,300 units. However, we expect a rapid recovery over the rest of the forecast period, with total automotive sales exceeding 137,000 units by 2013, an increase of almost a third over 2008 levels.

Slovakia scores 45.1 points (out of a theoretical maximum of 100) in the BMI automotive business environment rating this quarter, unchanged from the previous quarter. This places it in 11th place, putting it 2.7 points ahead of Hungary and 0.4 points behind Slovenia. Slovakia’s chief weak point is its country structure, with a relatively rigid labour force caused by a skills shortage, low per capita income and low levels of urbanisation, although it remains attractive due to low labour costs. Despite a strong automotive industry, Slovakia has a small car market, although the low rates of car ownership give it plenty of potential for growth.