Login | Register
Items in shopping cart: 0 | View
Slowed sales challenge domestic carmakers
23 Sep 2013 Jana Liptáková Industry
WITH car sales across Europe in decline, car producers in Slovakia are not immune to the impact. PSA Peugeot Citroën in Slovakia, the latest company to feel the sting, has just announced that it will temporarily halt production this year. Experts say the reduced production is due to the company’s heavy dependence on the European market. Slovakia’s auto industry is generally less sensitive to market fluctuations, however, thanks to the extensive portfolio of cars produced in the country and its focus on the global market.
“The sale of cars experiences huge swings,” Peter Švec, spokesperson of the Trnava-based PSA Peugeot Citroën, told the Hospodárske Noviny daily, citing weak market demand as behind the planned halt in production.
PSA Peugeot Citroën, one of the most technologically advanced plants in the PSA Peugeot Citroën group and one of three car producers in Slovakia, will halt car production for one week, starting Monday, September 23. Another week-long suspension will start on October 28, Švec confirmed for Hospodárske Noviny. The car producer will also stop production lines on some Fridays, but Švec did not specify the exact number or dates.
Jiří Šimara, an analyst with the company Cyrrus, sees PSA Peugeot Citroën’s heavy reliance on the European market as the French carmaker’s most fundamental problem.
“The fact that they generate 70 percent of the revenues on the market, which has fallen by one fifth over the last six years, has to reflect somewhere,” Šimara told Hospodárske Noviny.
Global industry in Slovakia
Jaroslav Holeček, the president of the Automotive Industry Association of the Slovak Republic (ZAP), describes the Slovak automotive industry as rather stable when taking into account declining car sales and overcapacity of car production in Europe.
“Car production in Slovakia oscillates around existing production capacities, which is the annual production of about one million cars,” Holeček told The Slovak Spectator.
Carmakers in Slovakia manufactured a total of 926,555 cars in 2012, a 44.9-percent increase compared with the previous year, due especially to the launch of new models and extending production in factories in Trnava and Žilina to a third shift. This year ZAP believes production will exceed 930,000 based on production in the first half of the year.
Holeček highlights that car plants in Slovakia are among the most modern and advanced, that their focus extends far beyond Slovakia, and that they export cars to countries whose markets have not become oversaturated.
“It is an enormous advantage that all three carmakers operating in Slovakia are successful within their concerns and that they produce cars neither [solely] for the Slovak market nor the European one, but the global market,” said Holeček. “And when we are speaking about the global market, it is enormously important for us to export cars to Russia, China and other countries, in which the strong development in the sale of cars is ongoing.”
Last year Volkswagen Slovakia exported 99.7 percent of its production, with the biggest portion of its output, 40.2 percent, going to the German market, followed by China with 9.5 percent and Great Britain with 7.1 percent. Kia Motors Slovakia in Teplička nad Váhom, near Žilina, exported 99 percent of its production last year.
Holeček sees this as a strong competitive advantage of carmakers in Slovakia compared with other European countries, which are experiencing a serious crisis in car sales.
Ivan Hodač, general secretary of the European Automobile Manufacturers (ACEA), estimated for Hospodárske Noviny that in Europe there is 20-30 percent overcapacity in car production.
Since the plants are very expensive, they need to be closed, and Ford, GM, Fiat, PSA and others are already closing some of their facilities. But he believes that this will benefit the Slovak auto industry, adding that car production in Slovakia has been increasing every year because it is inexpensive and of very high quality.
“The Slovak automotive industry is modern and the last plants that somebody would want to close would be those [which are the] most effective, and today these are in Slovakia,” Hodač told The Slovak Spectator.
Cars manufactured in Slovakia
Car production in Slovakia exceeded 556,400 units in the first half of 2013, although carmakers warn that cars sales for the second half of the year are traditionally weaker.
Volkswagen Slovakia (VW SK), the Slovak arm of the German carmaker, which has been manufacturing cars for more than 21 years, produced more than 219,500 units during the first half of 2013, the company wrote in its August 27 press release. This was a 4.8-percent increase compared with the same period in 2012. VW SK manufactured 419,000 cars in 2012.
“In spite of sharpened conditions on the market we produced [cars] at a stable level during the first half of 2013,” Albrecht Reimold, CEO of VW SK said, as cited in the press release.
In May the company launched the production of the Volkswagen cross up! and it continues to prepare for its production of an electric car, the Volkswagen e-up! VW SK is planning to ceremonially launch the electric car in the second half of the year. It was already introduced at the Frankfurt Auto Show earlier in September.
The company expects that the volatility of the world market will persist in the latter half of 2013.
Between 2012 and 2016, the company plans to invest a total of €1.5 billion in Slovakia. This includes investments in new pressing and body shops.
Kia Motors Slovakia also continued to increase its car production. In 2012 it manufactured 292,050 units.
“In spite of the not very favourable situation on the car market in Europe, we at Kia Motors Slovakia manufactured 158,900 cars during the first half of 2013 and reached a 6-percent increase,” Jozef Bačé, spokesperson of Kia Motors Slovakia, told The Slovak Spectator, ascribing the increase to the full usage of its production capacities as well as “the trust of European customers, who managed to appraise the combination of high quality, attractive design and competitive pricing of our cars”.
Because the plant, which began production in late 2006, is now operating at full production capacity for the first time ever, they believe that they will manufacture more cars in 2013 than last year. Kia Motors Slovakia launched a third work shift in early 2012 thanks to enough orders and preparation for production of new models.
The plant, which is the Korean carmaker’s first in Europe, invests in the production of new models. During the first seven months of 2013 it invested over €37 million, which went into adaptations of production lines for higher performance versions of the Kia cee’d model, the three-door pro_cee’d GT and the five-door cee’d GT.
Most of the cars Kia manufactured in the first half of 2013 were exported to Russia (24 percent), the UK (14 percent), Germany (9 percent), France (5 percent) and Italy (5 percent). Almost 1 percent of output is sold in Slovakia, the company informs on its website.
PSA Peugeot Citroën manufactured almost 215,000 cars in 2012, compared with 178,000 cars in 2011. In the first half of 2013 it produced 137,000 units, Hospodárske Noviny reported in mid July.
The company currently manufactures two models, the Peugeot 208 and the Citroën C3 Picasso.
The announced production breaks are not the first. In the past the carmaker stopped production lines either due to problems with demand or when lines were being adapted to produce a new model.
PSA Peugeot Citroën remains tight-lipped about how many cars it plans to produce this year. Švec specified for the TASR newswire on September 18 that it plans to increase the production by 6 percent compared with 2012 and thus produce a record number of cars in the plant’s history.
PSA Peugeot Citroën is beginning to look beyond Europe’s borders. In January it began producing a version of the Peugeot 208 for the Russian market, equipped with heated windshield washer pumps. In March it also started to produce a model of the Peugeot 208 for the UK market. The company announced in March that it plans to manufacture up to 20,000 right-wheel drive cars in 2013.
Most read articles
Euro Calculator (Sk30.1260 = 1 EUR)
What influences your travel plans?
Quote of the Week
“The candidacy is meant for someone who arrives well known and does not need a year and a half to show his face.” PM Robert Fico comments on the possibility of his running in the 2014 presidential elections.