Slovakia's carmakers continue to drive growth

By bne IntelliNews July 4, 2012

Tim Gosling in Prague -

With the sector taking many of the plaudits for helping the Slovak economy stand up far better than expected so far through the Eurozone crisis, official figures confirm that the country's auto output hiked 14% year-on-year in 2011. The sector is targeting a further 45% rise in production for 2012.

Overall, automotive producers in Slovakia produced 640,000 cars in 2011, the TASR newswire reports, making the country the 19th largest producer in the world. The result helped Slovakia record the highest GDP growth in the EU in the fourth quarter of the year at 0.9% quarter-on-quarter. It followed that up with 0.8% growth in the first quarter of 2012, and industrial production growth of over 12%, even as CEE peers such as the Czech Republic and Romania slumped into recession. The Slovak finance ministry's latest forecast for 2012 full year growth is 2.6%.

The international brands that arrived in the country over the past decade have helped make Slovakia the world's largest carmaker in per capita terms, and have been central to developing the economy. However, the country continues to struggle for employment, with jobless figures bobbing just below 15% for the past few years. The auto industry employs around 75,000 in a country of 5.5m.

The high numbers of jobless Slovaks have depressed domestic demand and put the onus even more on the car makers and electronics manufacturers that power exports - of which the carmakers are responsible for around a full third. That leaves the country highly-exposed to external conditions, but the worry that the Eurozone crisis would see plummeting demand in the EU markets that Slovakia relies upon is yet to materialize.

In fact, with sales proving resilient, and demand in emerging markets having taken up a good deal of slack, the likes of Volkswagen and Kia have both expressed bullish outlooks for their Slovak operations in recent months, and promised large capacity expansions. Volkswagen Slovakia said earlier this week, as it broke ground on a new bodyshop, that it expects its production lines to operate at close to full capacity for the remainder of the year.

Overall, Slovakia-based car producers plan to increase production to 925,000 cars in 2012, representing a 45% rise year-on-year, marketing and communication manager of the Slovak Information and Marketing Company (SIMS) Patricia Macikova told TASR.

New production lines for SUVs and other larger cars heading to emerging markets helped drive output growth in 2011, say reports. This year, production lines turning out cheaper, compact vehicles, such as Volkswagen's Up!, have come on-line. "There is one risk," said SIMS business director Julius Cincala, "that this growth may plateau. However, if the new small-car models take hold, this danger will be averted."

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