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Opportunities: Automotive Industry |
The information below is provided
by Prague Business Journal
www.pbj.cz
Foreign auto makers are boasting unexpectedly
large sales growth in the Czech Republic where local manufacturer
Skoda Auto is suffering from high prices caused by a strong
crown.
The firming crown has put Skoda at a big disadvantage
on the domestic market, said Milan Smutny, the spokesman
of Skoda Auto. "Our big problem is the strong Czech
crown, which is an advantage for our competitors because
they import cars and can offer special discounts. Mr.
[Vratislav] Kulhanek [the chairman of the Skoda Auto board]
asked for a normalization of the currency. To be clear,
we don't want a depreciation of the currency, but stable
measures to adapt the crown to the conditions of the market,"
said Smutny. Analysts say that Skoda faces particular
pressure because two of its key markets, Germany and Poland,
are contracting, and downturns there could deepen. Germany
is Skoda Auto´s biggest single export market.
Skoda Auto, whose Czech sales rose 12.5 percent to Kc
153.27 billion last year, is aware of the market pressure
but says the company can't just lower prices because it
must first ensure a profit. "The sales are our only
source of cash," Skoda Auto spokesman Milan Smutny
said. "Other foreign car makers are just trying to
buy market share through discounts or other special offers.
They can afford to make these discounts because they make
money in other markets with other, more expensive, models."
Smutny says that Skoda Auto realizes its rivals' promotions
will erode its market share, a healthy 52.6 percent last
year. "But now we're doing very well. We enjoy a
market share here that no other manufacturer enjoys in
its home country and realize that we can't grow anymore,"
Smutny said. "So, what we can do is just defend this
market share."
Skoda Auto netted profits of Kc 2.129 billion in 2001,
a decline from Kc 3.336 billion in 2000. The company has
blamed the strong crown for the fall in profits. It also
said that the company's high investments last year ate
into profit. Skoda Auto pumped nearly Kc 1.304 billion
into environmental protection which includes liquidating
past environmental problems. The local car maker's exports
accounted for 9.9 percent of total Czech sales abroad
last year.
Skoda Auto expects at least the same sales this year despite
the worldwide recession in the industry and stepped-up
local competition, it said. The company aims to sell at
least 500,000 cars worldwide and hopes for a stabilization
of the Czech currency. The new model Superb, produced
in the Kvasiny-based plant and sold to some 150 top civil
servants here, will start to be sold on most European
markets from the middle of this year. Confronted with
the first decrease in its profit, the Czech maker reduced
its staff by 5.3 percent year-on-year to 21,394 last year.
In the Czech Republic Volkswagen has the second biggest
market share. Citroen grabbed 2.8 percent of the market
and sold 4,259 passenger cars last year, 42 percent more
than a year before, which amounts to the biggest year-on-year
local sales growth among manufacturers.
Renault has the third highest sales of passenger cars
in the country with a 5.8 percent market share last year.
Last year Peugeot sold 8,344 cars in the Czech Republic
and grabbed 5.48 percent of the market.
One fresh challenge for Skoda could come in 2005, when
it will no longer be the only car manufacturer producing
locally. In that year, PSA/Toyota will open a joint plant
in Kolin in Central Bohemia, and although the vast majority
of the 300,000 cars produced annually will be exported,
Skoda could well wonder what impact locally produced,
low-cost cars will have on its dominant market share.
Foreign car parts makers have been pouring into the country,
in hopes of grabbing a piece of the business generated
by the Kolin-based Toyota/PSA plant.
After landing the Toyota/PSA deal, CzechInvest, the government
agency promoting foreign direct investment, succeeded
in bringing in a total $1.3 billion (Kc 46 billion) in
Japanese investment. The auto components industry accounts
for much of this, according to the agency.
Takada Industry, a Japanese producer of plastic car components,
announced that it would pump some Kc 200 million into
a production facility in Louny, North Bohemia, which is
planned to start production next year. Louny is the destination
of other Japanese businesses as well. The car components
maker Aisan has already purchased land in this region
where it plans to build a plant producing pumps for diesel
engines. Another company interested in investing in the
Louny industrial zone is the headlights maker Koito Manufacturing,
which is to spend Kc 1 billion on its plant.
Japanese cash is also coming to the Borska Pole industrial
zone in West Bohemia. Two car parts makers, Koyo Seiko
and Fuji Kiko plan to pump roughly Kc 1 billion into a
joint production facility here, which is to launch production
at the end of 2003/beginning of 2004.
Aoyama Seisakusho plans to invest nearly Kc 875 million
in the construction of a plant to produce car components
in Lovosice, North Bohemia. The carbon brushes producer
Tris Czech, fully owned by the Japanese Tris Inc., is
to start building its Kc 145 million plant in April. Toyoda
Gosei has decided to expand its investment in a plant
in Klasterec nad Ohri, where it will produce airbags and
rubber sealings. And the flood continues. CzechInvest
is negotiating with at least 30 other car parts makers
interested in investing here, according to spokeswoman
Pavlina Bolfova.
Anticipating increased orders from the Toyota/PSA factory,
many local car parts makers have already begun to expand
their production capacities. The largest Czech maker of
plastic car components, Liberec-based Peguform Bohemia,
has already begun building a new plant in Nymburk, Central
Bohemia.
Shock absorber producer Monroe, fully owned by the U.S.
company Tenneco Automotive, is planning to more than triple
production by the end of 2003. "More production is
moving to the East, and this can only make us happy,"
said Marcela Randakova, Monroe's human resources manager.
"Now we produce 8,000 components a day, but our plans
are to make 26,000 [components a day] by the end of next
year."
Many local producers have already begun negotiating with
potential new customers. "This expansion [in the
local car industry] means new opportunities for us,"
said Miroslav Dubec, sales manager with the U.S.-owned
wheel producer Hayes Lemmerz Autokola, based in Ostrava-Kuncice.
"We are already negotiating with Peugeot for future
supplies. I'm sure that our company will expand pretty
soon." Nearly 90 percent of the car components industry
here is foreign, mainly coming from Germany and the U.S.
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