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AUTOMOTIVE INDUSTRY - AUTOMAKERS' INVESTMENTS A SIGN OF LONG-TERM INTEREST

Production to reach half million

SLOVAKIA will produce half a million cars this year if the three auto giants that have made Slovakia their Central European home stick to their plans.
The Automotive Industry Association estimates that by 2010, the country could be rolling out around 800,000 vehicles a year, which would confirm Slovakia's place among the world leaders in per capita car production.

SLOVAKIA will produce half a million cars this year if the three auto giants that have made Slovakia their Central European home stick to their plans.

The Automotive Industry Association estimates that by 2010, the country could be rolling out around 800,000 vehicles a year, which would confirm Slovakia's place among the world leaders in per capita car production.

Last year, Volkswagen, PSA Pegueot Citroen and Kia Motors Slovakia produced 295,390 vehicles. As the number of cars produced increased, the share of the automotive sector in Slovakia's overall industrial production grew from 25 percent in 2005 to 28.4 percent last year, the Automotive Industry Association reported.

Last year, car makers and their sub-suppliers posted a record turnover of Sk443 billion, which was a 34.2 percent growth over the year before.

"We set a new record last year. All three final producers participated in it," said AIA president Jozef Uhrík.

However, this record growth opens up serious questions about the Slovak car industry's prospects after 2010, and how much carmakers are committed to staying in the country.

"Car manufacturing, just like the production of all other goods, depends on the market demand," Dárius Bošjak of the Slovak Economy Ministry told The Slovak Spectator.

The automotive market has been developing favourably with a prospect of further growth.

Regardless of market developments, the cheaper labour and better conditions that countries further east might offer could lure carmakers away. However, Bošjak said the auto manufacturers currently in Slovakia have certain obligations to fulfil due to the investment stimuli the government provided to them.

"The investment stimuli the carmakers received obliges them to remain for at least five years in the region they made the investment," said Bošjak.

This condition stems from the guidelines for national regional aid issued by the European Commission. According to the Economy Ministry's webpage, the Slovak government approved approximately Sk5 billion in investment incentives for PSA Peugeot Citroen and Sk5.4 billion for Kia Motors.

One indication that the companies want to stay in Slovakia longer is the volume of the investments they made here, Bošjak said. Volkswagen has invested €1.3 billion in Slovakia since 1991, PSA Pegueot Citroen more than €1 billion since 2003, and Kia Motors €1 billion since 2004.

Investors expect a favourable and stable economic environment as well as qualified labour in the country where they invest their money, Bošjak said.

The Korean carmaker Kia Motors has confirmed that its investment in Slovakia will be long-term and is not limited by time.

"The investment is in line with the company's global strategy to increase its sales worldwide," Kia spokesman Dušan Dvořák told The Slovak Spectator.

Kia sales have been growing on the European market, said Dvořák. The construction of the new Žilina plant where new model cee'd is designed and produced for European customers should boost future growth, he added.

More than 10 Korean suppliers are tied to the Kia investment, and the companies have invested and built plants in Slovakia.

Another sign of Kia Motors' long-term interest is its possible cooperation with Hyundai, which is building a new plant in the Czech Republic, Dvořák said.

"We expect to increase our motor production capacity in the Žilina plant so that we can supply motors to Hyundai," he said.

Representatives from the other two car manufacturers were not available for comment.

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