Small cars drive East Europe's plants out of crisis

7th December 2009, Comments 0 comments

Small cars sold relatively well during the crisis as they were especially popular among buyers inspired by cash-for-clunkers schemes.

Prague -- Central and eastern Europe's auto industry -- the engine driving several of the region's economies -- was hit hard by the global crisis, but its focus on small, thrifty models is fuelling recovery.

"Since the last increase in oil prices, it has turned out that demand for smaller cars is stronger than demand for large ones," Pavel Sobisek, an analyst with UniCredit Bank in Prague, told AFP.

Small cars sold relatively well during the crisis as they were especially popular among buyers inspired by cash-for-clunkers schemes -- subsidies introduced by several states to persuade drivers to swap their old vehicles for brand new ones.

Schemes in Germany and France have turned central and eastern European producers of smaller models into winners, especially as their plants export most of their output to western Europe.

"Without the cash-for-clunkers benefits in European Union countries, the slump in output would certainly have been greater," Antonin Sipek, director of the Czech Association of Automotive Industries told AFP.

"The year 2009 has been a success for us thanks to the scrapping scheme," added Slovak PSA Peugeot Citroen spokesman Peter Svec.

"We expect to produce more than 200,000 units in 2009, which is an increase of 10 percent over 2008," he told AFP.

Other factories benefiting from a focus on small cars include Poland's largest carmaker -- a branch of Italy's Fiat, based in the southern town of Tychy, which produces small speedy Fiat 500 and Panda models.

"We expected to produce a record number of some 600,000 cars in Tychy this year, and it seems we will make it," Boguslaw Cieslar, spokesman for Fiat's Polish branch, told AFP.

In 2008, Fiat turned out 492,000 cars in Poland, which makes up almost three-quarters of the country's total car output.

But the scrapping bonuses were only a temporary measure and local carmakers may now have to get used to thinner sales.

"I will not give you an output estimate for 2010, but as the scrapping bonuses in EU countries have ended, we expect a more difficult first half of the year," PSA Peugeot Citroen's Svec cautioned.

With the future still uncertain, carmakers across the region are pinning hopes on zippy new models which they see as the magic formula for anxiously awaited growth.

General Motors' Opel plant in Poland recently launched production of a new Opel Astra IV.

"A lot of hope has been placed in this project," said Agnieszka Bloch, director of the Polish Chamber of Automotive Industry.

In Turkey, a home to Renault, Fiat, Ford, Toyota, Hyundai and Honda plants whose combined output slumped by an annual 36.4 percent in January-September, "new projects... are being born" as well, says a recent report from a French business mission in Istanbul.

Turkish plants have announced a new Ford Transit model, new hybrid and electric cars including the electric Renault Fluence ZE, and the country is also awaiting new investors including China's Dongfeng Motor and Chery.

The Czech plant of South Korea's Hyundai is newly selling the Kia Venga MPV, Slovak Volkswagen is expanding its plant in Bratislava to produce a new small family car from 2011, and its local rival KIA Motors expects a brighter future too.

"In 2010 we expect to raise output to 210,000 units (from an expected 150,000 this year) as we plan to launch two new models on the market," said Dusan Dvorak, spokesman for KIA Motors in Slovakia.

Other small car producers in the region could have fared better through the crisis but have at least steered clear of the collapse suffered by US rivals producing gas-guzzlers.

Output at the largest Czech car maker Skoda Auto, a Volkswagen unit whose portfolio is dominated by the small Skoda Fabia model, tumbled to 386,003 units in January-September 2009 from almost half a million cars a year ago.

The Suzuki plant in Hungary, producing the small Swift, Splash and SX4 models, expects its output to drop to 180,000 cars this year from 281,686 units in 2008, said communications manager Viktoria Ruska.

And the Czech Hyundai plant, leaning on the small Hyundai i30 model, has revised its plan for 2009, cutting projected output to 120,000 from 160,000 units, said its spokesman Petr Vanek.

"But we can see a turnaround from stagnation towards growth in our orders,” he said. “We're convinced we will grow next year."

Jan Flemr/AFP/Expatica

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