Germans Are Looking Good Thanks To Easter Europe
|   Thursday, October 25, 2012
While economic hardships are felt all over the planet, there are places more afflicted than others. One region is generally proving productive for automakers and that is Eastern Europe.

Auto manufacturers like Renault, Fiat, PSA/Peugeot-Citroen, and Opel are in an ample process of reorganization and are having problems in carrying out activities in factories in Western Europe. These problems outweigh the benefits realized in Eastern Europe.

Some manufacturers, here we include Volkswagen, Mercedes Benz, Kia and Hyundai, have increased European market share despite economic difficulties.
Thus, they reached a market share of 35.5 percent in the eight months up to the end August 2012, rising from 30 percent in the same period of 2010. By comparison, the combined market share of Renault Group, PSA, Fiat Group, and Opel has gone down to 33.3 percent from 38.6 percent.

The unit chief executive of VW, Albrecht Reimold said for Autonews, "The year 2012 is the most successful year ever for Volkswagen Slovakia. We can be 100 percent sure that we will reach our target." The target is to double production to 400,000 vehicles this year.

The successful manufacturer Volkswagen in Slovakia showed the existence of a rift between producers in Western Europe and those in Eastern Europe. Thus, on the one hand, there are those who have been forced to cut down on costs over the last decade in the western parts of Europe, and on the other hand, there are those who havee expensive factories in Eastern Europe.

After the fall of the Soviet Union in 1989, former satellite countries turned into attractive investment areas. The former republic of Czechoslovakia peacefully split into two countries, Slovakia and the Czech Republic, and was one of the major beneficiaries of investments in the automotive field.
Poland, Hungary, Romania and Slovenia are also important auto players in the region. Those parts produced 3.24 million passenger cars in 2011, meaning more than a fifth of the EU total or cars came from the Eastern parts of Europe.

The auto sector is also a large employer in those regions with more than 360,000 people working in it; that number includes the numerous assembly plants supplying parts, such as windshields and tires.

The region will also get more investments in the future too. Until 2016 Volkswagen has plans to invest some 1.6 billion euro (2.1 billion dollars), into its Slovak operations. Germany's Daimler started producing new Mercedes B Class cars at an 800 million euro factory this March, boosting Hungarian car production by 11 percent in the first eight months.

However, broader economic problems are forcing automakers to make cuts even in Eastern Europe. PSA has announced plans to reduce 12,000 jobs in Europe and close at least one factory in France.

The reason to why big car makers are going east is simple: average Czech wages are a third of Germany's, sitting at 10 euro per hour. Romania is even cheaper; here an average worker costs 4 euro. Now compare to France's 34 euro per hour.

The long term solution is to look for other markets, like Skoda is doing. China, Russia and India are all waiting patiently.
PHOTO GALLERY
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