Abstract
The Romanian automotive industry is set for strong output growth from H209 as a result of investment in
Ford's newly acquired Craiova plant, but the local market is set for a two-year period of recession and
stagnation, according to BMI's latest Romania Automotives Report.
In the first three quarters of 2008, Romanian automotive sales grew 17.9% year-on-year (y-o-y) to
196,764 units, with car sales up 15.2%, LCVs up 86.9%, HCVs up 38.5% and buses up 10.0%. While
growth across the whole period was impressive, trends observed in Q308 suggest the market was facing a
serious slump, with BMI estimating that 2008 sales totalled around 332,500 units, a fall of 9.4% y-o-y.
BMI is in agreement with industry sources, who predict that the slump will continue throughout 2009
when sales are forecast at around 257,700 units, a fall of 22.4% y-o-y. Romania will remain mired in a
financial crisis and a drastic economic slowdown throughout the year, with recovery in the automotive
market expected in H210. The recovery is likely to strengthen throughout the forecast period as the used
car market reaches its maximum potential, incomes rise and credit conditions improve. The rebound will
be faster than most developed markets due to the country's unrealised sales potential. By 2013, sales will
exceed 533,000 units, an increase of over 40% on 2008 estimates.
Aside from the financial crisis, the automotive market faces the challenges posed by EU taxation
regulations. A new first-time registration tax based on emissions and a depreciation allowance according
to vehicle age is leading to an influx of used cars that threatens new car sales, particularly of Dacia's
Logan model, prompting concerns that the Romanian market may experience the kind of car sales slump
seen in Poland following its accession to the EU in 2004.
The downturn in domestic and export markets also prompted local Dacia, a subsidiary of Renault, to
reduce its 2008 output target from 310,000 to 270,000 units. Dacia currently builds budget-priced
compact cars, mostly for export. With the falling demand in the Western European markets, Dacia
anticipates lower export demand that will prompt it to lower production. BMI forecasts CBU output
growth slowing to 4.8% in 2009 with Dacia's projected decline in output offset by the resumption of
production at Craiova. A rapid revival is expected from 2010, partly as a result of a recovery in markets
but largely due to Ford's investment in additional car production capacity, which should be fully up and
running by 2010. Output should fall just short of 700,000 units by 2013 as both the main car plants
approach their full potential, serving as a low-cost production base for the rest of Europe. The increase in
production volumes at Pitesti along with a move to increase local content from 65% to 80% within two
years will lead to a large increase in demand from local automotive suppliers. A new surge of investment
in the automotive supply sector is expected in 2009 in response to Ford production, with Ford pledging
60% localisation.
Romania scored 47.3 points (out of a theoretical maximum of 100) in the BMI Automotive Business
Environment Ratings. This was a reduction of 4.6 points from the previous quarter, with Romania
plummeting from fifth place to seventh place in the regional ranking, lying 0.3 points behind Lithuania
and 0.1 point ahead of Serbia. The reduction in Romania's score was related to deteriorating market
performance, with car sales set to slump in 2009, and the rising cost of wages within the industry. At the
same time, the imposition the new registration tax has led to a decline in the country's market risk score.
Nevertheless, Romania's automotive industry is set for strong growth in the long term as a result of
Ford's acquisition of Automobile Craiova and its plans for capacity expansion. Areas of particular
weakness are the lack of competition and the relatively high level of economic risk.
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