Abstract
Hungary is facing its most trying economic challenge since its post-communist
transition of the early
1990s. While growth is contracting across Europe,
Hungary' s recession is expected to be particularly
deep. The autos sector
is being hit on two fronts: on the one hand, consumers are tightening their
wallets,
which is pulling down domestic sales. And on the other hand,
falling export demand is forcing
manufacturers to scale back production
and dismiss workers. This is the case presented by BMI in this
report.
In Q109, new car sales in Hungary fell by 33.7% year-on-year (y-o-y) to 26,372
units, according to the
Association des Constructeurs Européens
d' Automobiles (ACEA). The chairman of the Hungarian Car
Importers
Association (MGE) has said that new vehicle sales could plunge by nearly 50%
this year to
85,000-90,000 units. The group' s earlier forecast had been
for sales to fall to 120,000 units. This sharply
decline reflects the
swift deterioration in Hungary' s economy.
The commercial vehicle segment
is also feeling the effects of the slumping economy as businesses cut
back
on purchasing new company cars. In the quarter, total sales of light
commercial vehicles (LCVs) fell
by 30.1% y-o-y, according to the ACEA. The
segment showed some resilience last year with sales
remaining almost flat.
But the slump in Q1 suggests that LCVs are now taking the same downward
trajectory as passenger car sales.
Manufacturers have been slowing down
operations in response to the slump in exports and domestic
sales.
Germany' s Audi shut car production and scaled back engine production at its
Gyor plant before and
after the Easter holiday in April. The automaker
made similar production cuts during the Christmas
holiday in 2008 and then
again in February, with further plans to close the plant for three weeks
in
August.
General Motors Powertrain (GM Powertrain), the Hungarian
subsidiary of US group General Motors
(GM), moved to a four-day week from
mid-April at its engine and transmissions manufacturing plant in
Szentgotthard, although later that month, the plant' s CEO said that the
cutback could be temporary.
Suppliers are also facing a sharp reduction in
orders. Nevertheless, many suppliers still see Hungary as an
attractive
location for investment over the long term. German parts supplier Continental
is looking to
move one of its production units from Spain to Hungary.
ContiTech Fluid Automotive Hungary, the
supplier' s fluid technology
division in the country, will be reportedly investing nearly EUR5mn for
the
installation of vulcanising furnaces, the extruder lines and
assembling machines at its plants in Makó and
Vac.
BMI forecast a 6.4%
y-o-y contraction in the country' s GDP this year. Conditions are unlikely
to
improve dramatically, and our 2010 growth forecast stands at 0.1%
y-o-y. On the whole, the passenger
car market is set for slow recovery. By
end-2013, sales are forecast to rise to 169,980 units, up by less
than 5%
from 2008 and well below the level reached in 2007.
Manufacturers are
likely to keep cutting costs and slowing operations at their facilities
through the year.
Once the global economy picks up again, especially in
the eurozone, output should begin to rise. The
scrappage plans announced
by several European governments may also provide short-term support for
exports. BMI forecasts total production to reach 1.5mn units in 2013, up from
692,182 units produced in
2008.
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