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Czech Republic Autos Report Q3 2011
Business Monitor International, June 2011, Pages: 48
Business Monitor International's Czech Republic Autos Report provides industry professionals and strategists, corporate analysts, auto associations, government departments and regulatory bodies with independent forecasts and competitive intelligence on Czech Republic's automotive industry.
With Czech passenger car sales in the first four months of 2011 reaching 56,646 units, only 3.7% higher than in the same period last year, BMI holds to its forecast of sales rising 2.8% y-o-y in 2011. Although we see a significant improvement in consumer demand from 2012, we do not anticipate a complete recovery in sales to pre-crisis levels until 2013.
BMI believes a number of factors are slowing the recovery in vehicle demand. Unemployment continues to be high, with the latest figures from Eurostat showing it stood at 7.2% in March 2011. Although this is an improvement on the 9.6% rate recorded in December, BMI's Macroeconomic team expects the rate to average 8.4% in 2011, which will undoubtedly act as a drag on domestic demand for vehicles.
The commercial vehicle segment is providing some hope with sales of light commercial vehicles showing the return to growth, which BMI had forecast for 2011. We are also optimistic about the heavier segment, where leading domestic player Tatra has revealed plans to produce vehicles in Brazil, Russia and Saudi Arabia in the next two to three years, falling in line with BMI's view that carmakers from emerging markets will strengthen their presence internationally. Given that Tatra currently has little presence in any of these markets, we approve its decision to enter them initially via partnerships with local firms, with a view to eventually setting up local production. Such partnerships help carmakers establish their presence in new markets and help create production networks prior to full launch.
Investment in vehicles is also being backed up by suppliers. In late 2010, Italian parts maker Brembo set up a wholly owned subsidiary named Brembo Czech, based in Ostrava, in a move that makes way for the supplier's entry into the medium and high-end vehicle segment. The expansion, which was motivated by increased demand for lightweight vehicle components as a way of reducing vehicle emissions, justifies BMI's long-standing view that the impending emission regulations in Europe will open up immense opportunities for parts makers.
Accordingly, the company is looking to spend close to EUR35mn (US$45.4mn) over the next three years establishing a manufacturing facility in the Czech Republic. Production is likely to begin from 2011 and will comprise brake callipers and other aluminium components, all aimed at improving fuel efficiency and reducing emissions from vehicles. By 2014, the supplier hopes to have generated a sales turnover of nearly EUR55mn (US$71mn) from the new business and production of more than 1.5mn parts.
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