Abstract
The combination of a domestic downturn and Europe-wide recession will weigh on
the Czech autos
sector in 2009. New vehicle sales declined by nearly 18.9%
year-on-year (y-o-y) to 53,011 units in Q109,
according to estimates from
the Car Importers Association (CIA). However, the Czech Republic is
expected to withstand the economic crisis better than most of its Central and
Eastern European (CEE)
neighbours. Doing so would help its industry to
mount a strong recovery in 2011, according to BMI.
The economic troubles
that have engulfed Europe are having a direct impact on Czech exports,
which
account for about 7% of GDP. In 2M09, exports tumbled by 23.1%
compared with the period in 2008.
The trade surplus for the period was
CZK12.2bn compared with CZK24.8bn in 2008.
Scrappage schemes announced by
countries like Germany and Slovakia are providing some support to
manufacturers like Skoda Auto. Skoda returned to full working weeks in March
in order to meet rising
demand from Germany. Hyundai also announced that
it was restarting staff recruitment for its Nosovice
plant as of
March.
Experts believe that the slump in sales may prompt the government
to introduce its own CZK25,000
(US$1,278) scrappage scheme. This comes on
top of new business legislation that allows companies to
buy new vehicles
without having to pay VAT.
Incentives like this are expected to support
domestic sales. BMI has revised its sales forecast from -0.5%
to 2.7%
year-on-year (y-o-y) growth by year-end. This is still less than 2007' s
increase of 12.2%, which
was followed in 2008 by a 4.7% rise.
Government incentives will not be enough to shield the industry from the
worldwide slump in demand.
Companies are still cautious about
significantly ramping up production. In March, the Toyota-PSA
Peugeot
Citroën (TPCA) joint venture (JV) facility postponed plans to expand its
annual production to
340,000 units.
BMI stresses that there remains
potential for growth, and we expect a strong recovery in 2011. Our
longterm
prediction stands at passenger sales of 282,000 units by
end-2013. Output should exceed by 1.5mn
units by the end of the forecast
period, up by 20% compared with 2008 levels. Production will get a boost
from the Hyundai plant, which is expected to be operating at its full capacity
of 300,000 units by then.
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