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Estonia Autos Report 2011
Business Monitor International, Nov 2010, Pages: 44
Estonia Autos Report provides industry professionals and strategists, corporate analysts, auto associations, government departments and regulatory bodies with independent forecasts and competitive intelligence on Estonia's automotive industry.
The entire automotive industry in Estonia suffered significantly during the economic downturn. Despite showing some signs of improvement in Q409, the increase in sales and growth did not continue to increase into 2010. In 2009, the auto market in the Baltic States was one of the worst hit in Europe as total vehicle sales fell 66% when compared with sales during 2008.
This resulted in major players within the industry reporting significant losses including Volkswagen importer SE Auto Group Baltic, which lost approximately US$1.98mn. BMI predicts that a full recovery in demand for automobiles is still not likely in the near future. The European Automobile Manufacturers' Association (ACEA) stated that the Baltic States have not been performing as expected, especially when compared with the rest of Europe. General European vehicle sales increased by almost 5% y-o-y in Q110 which Estonia only sold 3,514 vehicles during the same period, nearly 35% lower when compared y-o-y.
One of the reasons the Estonian auto market is unable to improve is because many households are cutting back on their spending. Before the downturn, the increase in the auto market in the Baltics was largely due cheap consumer credit which ultimately made purchasing cars possible. However, with households and businesses under even greater pressure to reduce debts in 2010 and replenish their savings thereafter, it is unlikely that growth in vehicle demand will return to anywhere near pre-crisis levels. In fact, we fear the situation will be aggravated by a 20% unemployment rate and little growth commercial productivity. Car dealers can only hope that they will be able to attract customers with low-priced models.
In March 2010, Latvian news agency LETA reported that car registrations in Estonia had decreased by 3% y-o-y to 864. However, despite the decrease, it was the lowest decline in 23 months, which suggests that eventual recovery is possible. BMI expects that sales will still have decreased by the end of 2010 with a drop of around 2.3% and the growth between 2011 and 2014 is expected to reach just 6.6%, well below the 8.1% which was seen between 2003 and 2007. As a result, BMI predicts that sales will not reach pre-recession levels, reaching 28,328 units by 2014, 2.7% below 2008 figures and 24.4% below the market's climax of 2007.
However, amid all of the negative forecasts, AS Norma reported net profit of US$2.7mn in Q110, which is a substantial improvement on the net loss of US$1.01mn in Q109. During the first quarter of 2010, consolidated net sales increased by 66% y-o-y to US$20.68mn, which is a direct result of improved production by Russian carmakers. This financial report came shortly after the announcement by Autoliv that it intends to take full ownership of AS Norma in order to improve expansion possibilities and global growth.
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