Romania Autos Report Q2 2010

Romania’s automotive sector had a mixed year in 2009, with the fortunes of the domestic market and those of exporters diverging greatly. While sales within Romania slumped as the country entered a deep recession, exporters, and most notably leading domestic carmaker Automobile Dacia, benefitted from rising demand overseas. Europe’s relatively swift return to economic growth in the second half of the year may have been one reason for this, but it seems that the impact of car scrappage schemes in key export markets was the single most important factor.
New vehicle sales in Romania totalled 138,104 in the first 11 months of 2009, down 55.4% on the same period of 2008, according to statistics from the Association of Producers and Importers of Automobiles (APIA). Meanwhile, in 11M09, exports rose 56.4% to 238,247. For domestic producers, the surge in exports outweighed the slump in local demand, and output rose 13.3% to 273,340. The downturn has continued into the New Year. In January 2010, sales hit the lowest level for 20 years, with only 2,100 new cars registered, down 85% from the January 2009, hotnews.ro reported. Ominously for Dacia, this was the first time in recorded history that the national carmaker was not the number one seller, as it was overtaken by Volkswagen and Ford. Dacia is increasingly looking to build its exports, which is a wise strategy, given growing competition and sluggish sales on the domestic market. Dacia looks poised to benefit from the shift in consumer habits towards smaller, no-frills vehicles abroad as well as at home. Given an array of downside factors, BMI expects sales to flatline, reaching only 149,837 units for FY2010. Thereafter we expect steady sales growth, but by the end of the forecast period in 2014, sales will still be below 2007-2008 levels, at 290,002 – around the volume seen in 2006.
On the production side, the fading of car scrapping measures at a time when credit remains tight and governments are looking to reel in stimulus measures, clouds the immediate outlook, as a drop in Romania’s exports and output in November may indicate. Furthermore, smaller component manufacturers may find it harder to obtain loans. However, the advantages Romania has as a car production centre, including its location, relatively low costs, and EU membership, are drawing in continued investment, such as Ford’s in Craiova. BMI forecasts that production will reach 337,678 units in 2010, and climb to 437,245 by 2014.
The emergence of new or renewed vehicle factories in Romania and the region will also boost component makers. The Romanian autos industry could see an influx of investments in the near future, thanks to plans by as many as 12 parts makers to build production facilities in the country, as revealed by Constantin Stroe, chairman of the Association of Automotive Manufacturers of Romania (ACAROM) in February 2010. BMI believes Romania's attractiveness lies in its low-cost production and the entry of a large number of carmakers in the country over the last few years, which has helped bring investments from both Tier 1 and Tier 2 suppliers.