Production Forecast Revision
|Increasingly Bullish On Long-Term Outlook|
|Passenger Car Production, CBUs|
On the back of increased production and ongoing investment from the three largest vehicle manufacturers and exporters in the country, we are revising our 2012 passenger car production forecast for Slovakia. We now believe that this segment will increase 20% in 2012, to 708,000 units - a more bullish view than our previous forecast of 2.7% growth.
The Slovakian domestic passenger car market remains relatively small, and much of this production is for export. More generally, growth in exports accounts for a large proportion of Slovakia's increasing industrial productivity. Indeed, we have revised up our forecasts for Slovakia's current account balance in 2012 and 2013 on the back of robust export growth. We now expect Slovakia's current account to move into surplus this year, coming in at 1.7% of GDP, from a previous forecast of -0.6%; and 1.5% of GDP in 2013, from a previous forecast of 0.8% ( see our online service, August 14, 'Current Account Surplus In 2012 and 2013'). This highlights the growing industrial strength of the country.
This vehicle production growth, in Slovakia and other CEE states more generally ( see our online service, August 17, 'Mercedes Plans To Double Production At Hungary Plant') can be seen in contrast to decreasing production levels in Western Europe as auto manufacturers strive to cut costs amid continuing economic uncertainty in the region. BMI believes that the Western European auto market will remain generally weak in the short-to-medium term, and we expect auto investments in the region to dwindle, in contrast to the generally increasing investor sentiment in the CEE region.
Although vehicle production in Slovakia remains considerably lower than in Czech Republic and Poland, we are bullish on the longer term outlook for the segment. We expect to see ongoing investment from manufacturers with existing facilities in the country, with the potential for investments from other players as companies seek to shift their production sites away from Western Europe.
Volkswagen (VW) has announced that production at its Slovakia facility increased substantially in the first six months of 2012, to 209,400 units. In year 2011, production reached 210,441 units. This growth was on the back of strong demand for SUVs, which make up 56% of the site's output, and rising demand for the Up minicar model, which accounts for 44% of output.
The company plans to invest an additional EUR1.5bn (US$1.88bn) in its Slovakian operations by 2016. VW plans to roughly double output in 2012, following a 45.6% increase in 2011. The H112 production figures suggest it is on target to achieve this goal. The company's Slovakian revenues rose by 43% year-on-year (y-o-y) in 6m12 to EUR3.44bn (US$4.31bn).
In 6m12, Kia's output from its Slovakia operations increased 10% y-o-y, to 149,000 units. The company introduced a third work shift at its site in the beginning of 2012, and also began production of the new Kia cee'd model in April. Further, engine production increased 22% y-o-y in 6m12, to 237,000 units.
In May, PSA Peugeot Citroen announced that it would increase production capacity at its Slovakia site ahead of the launch of the Peugeot 208 hatchback model. Over 2012, the company hired an additional 900 employees.