Pedal to the metal in Slovakia

By bne IntelliNews April 20, 2012

Tim Gosling in Prague -

Bucking the trend for industrial slowdown in Europe thanks to rising demand from emerging markets, Slovak car production is set to rise to record numbers in 2012, the country's Car Industry Association has forecast.

The number of cars produced in assembly factories in Slovakia will probably rise to a record 780,000 vehicles in 2012, the association said according to Hospodarske noviny. Jozef Uhrik, the head of the Car Industry Association, told the newspaper that between them, Volkswagen, Kia and PSA Peugeot Citroen turned out 639,763 vehicles in 2011.

A new record production year would be excellent news for an economy so heavily reliant on exports, especially of cars. With domestic demand in the doldrums, exports constitute over 80% of Slovakia's GDP.

That exposure has been a huge worry as the Eurozone debt crisis has seen demand drop across Europe, taking industrial production growth with it. Slovak growth however has remained far more robust than expected. During the fourth quarter of 2011, when sentiment and output across Europe fell off a cliff, the country's economy grew 0.9% - the highest on the continent by far.

Slovakia followed that up with industrial production growth of 8.4% in January and February, the statistics office announced on April 11, with the auto industry front and centre.

By way of contrast, Poland - heralded as a European economic champion for 2012 - reported first quarter industrial production growth of just 0.7% on April 19. The country's auto industry provided the biggest drag, a result of "Poland's unfortunate product mix which has left it more vulnerable to a decline in exports to western Europe compared to countries like Slovakia," the FT pointed out.

The Slovak figures however back up recent announcements from the country's carmakers, with both German giant Volkswagen and South Korea's Kia saying they will boost investment to raise production. That is being driven by a rise in sales in emerging markets such as Russia and China, whilst demand in Europe for Slovakia's up to date SUVs and other models - as opposed to older cars produced in Poland - is also proving more robust than expected.

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