Abstract
The commencement of production at Hyundai’s new plant in the Czech
Republic will ensure the
continuation of strong automotive output growth
over the next five years, despite the negative impact the
sharp downturn
in the European market will have on Skoda production volumes, according to
BMI’s
latest Czech Republic Automotives Report.
The TPCA and
Hyundai plants raised capacity and output in the Czech Republic in 2008.
However, a
combination of a domestic downturn and a recession in the rest
of Europe has inevitably had a negative
impact on the short-term domestic
production outlook. The effects were already seen in Q408. Skoda
Auto
decided to cut back on vehicle production in the final two months of the year,
in response to the
ongoing global credit crisis. TPCA revealed that
although production levels in the Czech Republic would
be higher than last
year' s level of 630,000 vehicles, it will not produce its targeted 700,000
units in 2008.
According to Skoda’s plans, production would be
halted for an unspecified number of days in all three of
its factories in
the Czech Republic, bringing overall productions down by at least 18,000
vehicles this
year. The decision came on the back of falling vehicle
demand in its Western European markets, which
Skoda relies on for most of
its export-oriented production.
Nevertheless, in November 2008, Hyundai
began mass production of its i30 hatchback in its new plant at
Nosovice,
three months ahead of its scheduled date. Hyundai’s Czech production
capacity is initially
200,000 units per annum, but this is expected to
increase to 300,000 units in the future. The estimated
18,000 units
produced in the final two months of 2008 made up for the 18,000 reduction in
output at
Skoda’s factory, with BMI estimating that total annual
production of 1.14mn units for 2008 as a whole, a
23.6% y-o-y increase. By
2013, the Czech Republic’s automotive output should be more than a
third
greater than the level seen in 2008, as a result of the opening of
the Hyundai plant, the expansion of the
existing Skoda plant and a rapid
increase in production at the TPCA plant as it reaches full capacity.
In
the January-October 2008 period, new car registrations in the Czech Republic
grew by 10.1% y-o-y to
121,973 units. LCV sales rose 6.5% y-o-y to 50,978
units while in the HCV segment, sales fell 3.4% y-oy
to 9,213 units. The
bus segment saw fast-paced growth of 34.7% y-o-y to 912 units. At the same
time as
the new car market grew, the used car market declined. According
to AAA Auto Group, the Czech
Republic’s largest used car dealer,
used car sales fell 20% y-o-y in the first nine months of 2008 to
28,480
units.
Monthly trends suggest that the Czech market is heading for
uncertain times. ACEA figures for the first
nine months of 2008 revealed
that sales were highly volatile on a monthly basis. In September, sales
were
8.8% higher than in January, but compared to July sales were down
5.0%. This suggested that the market
had passed its peak in mid-2008 and
was unable to claw back the momentum seen in the first half. BMI
believes
the recovery in the car market, which began in 2007 when new car registrations
rose 12.7% y-oy,
will end by mid-2009. Automotive sales growth will
decline sharply to around 0.5% in 2009 and 2.7%
in 2010 before recovering
strongly from 2011, reaching around 282,000 units by 2013, a 28.8%
increase
over 2008 estimates.
The Czech Republic scored 55.8 points
(out of a theoretical maximum of 100) in the BMI automotive
business
environment rating this quarter, unchanged since the previous quarter. In the
rankings for
Central and Eastern Europe it lies in third place, 5.1 points
behind Poland and 4.7 points ahead of
Ukraine. The Czech Republic’s
automotive industry continues to report positive gains, with vehicle
production continuing to hit record levels and new car registrations in the
country on the increase,
underlining the sector’s overall health.
The country enjoys a supportive regulatory framework, relative
economic
and political stability and a free market economy.
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