BMI's Executive Summary

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Latvia's automotive market is set to enter a period of more moderate growth in 2008, following years of double-digit growth that earned it the distinction of being Europe's fastest growing car market, according to BMI's latest Latvia Automotive Report.

In 2007, automotive sales were up 31.9% year-on-year (y-o-y) to 40,044 units, on the back of 30.1% car sales growth and 42.9% commercial vehicle sales growth. However, the second half of the year witnessed a sharp slowdown, with growth of just 9.5%. The decline is related to the government's anti-inflationary policies and higher taxes on larger, more expensive cars, which are hitting consumer demand. Toyota led the market in 2007, with its sales rising 36.7% y-o-y to 3,917 units, and market share growing from 11.2% to 12.1%. However, Skoda saw its sales soar 59.8% to 2,661 units, moving it from fourth to second place with its market share rising from 6.5% to 8.2%. Of the top 10 most popular brands on the Latvian market, Honda and Citroen enjoyed the strongest growth rates with 83.4% and 61.1% respectively. The only big loser on the surging Latvian market was Hyundai, with its sales dropping 27.3%, leading to a decline in market share from 10.5% to 6.0%. Most other brands recorded high rates of sales growth on the Latvian market.

Government efforts to restrain domestic demand coupled with a tightening of financial conditions and a hardening of supply-side constraints will continue to weigh on domestic demand going into 2008, leading to a decline in demand for passenger cars. There is a possibility that the economy may be heading for a hard landing, leading to a stagnation in demand for new vehicles. The combination of higher borrowing costs and stricter lending criteria, along with declining confidence and the stabilisation of the property market began to affect the demand for credit in 2007 and in turn the demand for vehicles. Interest rates are expected to continue rising in the near term and credit growth should remain on a firmly downward trajectory. Credit growth will also be affected more generally by the slowing of economic activity and could fall precipitously in the event of a substantial decline in land and house prices. The demand for vehicles should follow the same trajectory.

BMI's forecasts show that passenger car sales will rise by just 7.0% in 2008, with single figure growth likely up until 2012, when growth is likely to return to double figures on the back of a return of high economic growth rates. By the end of the forecast period, passenger car sales should exceed 47,000 units, an increase of more than 40% over 2007 levels. In the commercial vehicles market, BMI believes that the LCV segment will be worse hit, since this sector is dependent on serving logistics for the retail sector, which is expected to show a downturn in activity in the near-term. In contrast, growth in the HCV segment, particularly heavy trucks, will be stronger due to demand for international haulage, although sales growth will be markedly lower than in recent years. Overall, BMI believes that commercial vehicle sales should reach just under 10,900 units by 2012, a 60% increase over 2007 levels.

Contents

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Chapter 1 – SWOT Analysis

Latvia Auto Industry SWOT

Chapter 2 – Europe Regional Market Overview

Production

Table: European Autos Production – Historical Data & Forecasts (CBUs unless otherwise stated)

Table: European Autos Production By Group, H1 2006

Table: Central And Eastern European Car Assembly Plants, 2006 (Countries under review)

Table: The Rise In Central And Eastern European Production And Average Wages

Sales

Table: Europe Autos Sales – Historical Data & Forecasts (CBUs unless otherwise stated)

Table: EU And EFTA Autos Sales By Group, H1 2006

Table: New Vehicle Registrations By Market In Europe (EU and EFTA), 2006

Table: New Car Registrations By Market In Europe (EU and EFTA), 2005

Competitive Landscape

Table: EU-15 And EFTA, Car Registrations, 2005

Table: Top 10 Best Selling Models In Europe, Jan-May 2000

Suppliers

Table: Top Five OEM Parts Suppliers, 2005

Regulation

Baltic Market Overview

Chapter 3 – Business Environment Rankings

Economics – Long-term Risk

Politics – Long-term Risk

CBU Output Growth

Vehicle Ownership/Penetration Potential

Regulation

Competitive Environment

Chapter 4 – Industry Forecast Scenario

Table: Latvia Autos Sector – Historical Data & Forecasts (CBUs unless otherwise stated)

Chapter 5 – Macroeconomic Forecast Scenario

Table: GDP, Output & Population

Country Snapshot: Latvia Demographic Data

Section 1: Population:

Table: Demographic Indicators (2005)

Table: Rural/Urban Breakdown

Section 2: Education & Healthcare

Table: Education

Table: Healthcare: Vital Statistics

Table: Healthcare: Expenditure

Section 3: Labour Market And Spending Power

Table: Employment Indicators

Table: Consumption And Stratification

Table: Wages Per Year

Chapter 6 – Special Focus: Commercial Vehicles

Regional Market Overview

Table: Regional Commercial Vehicle Market: Country Ranking, Sales

Table: Regional Commercial Vehicle Market: Country Ranking, Production

Table: Regional Commercial Vehicle Market: Company Ranking Of Significant Regional Manufacturers

Table: Recent And Planned Investments In Central And Eastern Europe

Baltics Market Overview

Table: Baltic Market, 2005

Table: Size Of Commercial Vehicle Market: Estonia

Table: Size Of Commercial Vehicle Market: Latvia

Table: Size Of Commercial Vehicle Market: Lithuania

Table: Baltic Market, Forecasts: 2010

Table: Commercial Vehicle Market Forecast: Estonia

Table: Commercial Vehicle Market Forecast: Latvia

Table: Commercial Vehicle Market Forecast: Lithuania

Chapter 7 – Competitive Landscape

Table: Top Five Winners In The Latvian Market: H1 2006 (CBUs, unless otherwise stated)

Table: Top Five Losers In The Latvian Market: H1 2006 (CBUs, unless otherwise stated)

Chapter 8 – Company Monitor

Regional Case Study: Kia

Sales

Table: Kia Sales In Europe (EU and EFTA), By Model

Production

Table: Kia Production In Europe (EU, EFTA, Romania and Turkey), By Model

Company Profiles

Toyota

Baltic Motors

BMI Forecast Modelling

Automobile Industry

Sources

Appendix: Regional Demographic Data

Table: Wages (ave. labour force per annum), US$ PPP

Table: Population

Table: Household Spending Per Capita, US$

Table: Private Consumption Per Capita, US$ PPP

Table: Market Size, GDP, US$bn

Competitive Landscape for European Automotives: Sample of  
Companies Ranked

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Rankings and Competitive Landscapes by production and sales; market share and change on previous year; number of employees, ownership structure and year established. Also includes analysis of company expansion, export and investment strategies.

Network of Automotive Sources

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BMI's European Automotives Reports are based on an extensive network of multilateral organisations, government departments, automotive industry associations, chambers of commerce and company reports. Information sources include: