Czech Republic Autos Report Q3 2008

Strong growth in Czech car sales in the first four months of 2008 has not changed BMI's forecast slowdown in 2008. BMI's latest Czech Republic Automotives Report believes year-end sales will decline due to ongoing tightening in the labour market that may squeeze nominal wages and consumer spending and the possibility of higher interest rates, which could be introduced to meet the requisite inflation targets for entry into the eurozone.

In the first four months of 2008, Czech car sales rose 13.6% year-on-year (y-o-y) to 47,808 units, while light commercial vehicle (LCV) sales rose 19.6% y-o-y to 21,029 units, heavy commercial vehicle (HCV) sales rose 11.6% to 3,633 units and bus sales rose 35.7% to 300 units. A change in the way companies write-off vehicles led to an upturn in the sale of small and large family cars, say industry sources.

Representing 43.2% of the car market, small car sales were up 12.2% y-o-y. The second-largest segment, lower middle cars, recorded growth of 25.8%. The growth in this period represents a strengthening of the performance recorded in 2007, when the car market grew 6.9% y-o-y.

BMI expects sales to dip slightly in 2008 to 131,217 units due to an ongoing tightening in the labour market that may squeeze nominal wages and consumer spending. We are optimistic about the country's overall economic outlook, however, which will ensure that car sales remain buoyant over the forecast period up to 2012. One further potential risk factor is the possibility of higher interest rates, which could be introduced to meet the requisite inflation targets for entry into the eurozone. Higher lending rates would dampen demand and could lead to stagnation in the Czech car market.

In Q108, according to the country's Automotive Industry Association (AIA) Czech automotive production was up 9.0% y-o-y to 269,142 units, of which 247,909 units were exported. Car and LCV production totalled 266,735 units with Skoda contributing 67% and the Toyota Peugeot Citroen plant representing the remaining 33%. Truck production totalled 616 units (73% Tatra, 27% Avia) and bus production totalled 863 units (84% Irisbus, 13% SOR, 1.5% KH Motor Centrum and 1.5% Tedom).

Motorcycles, trailers and semi-trailers are also included in AIA's figures, making up the remaining 928 units.

Growth in Q108 continued trends seen in 2007. Vehicle production in the Czech Republic hit record levels last year. According to AIA data, vehicle production reached 943,117 units in 2007, an increase of 9.94% on the previous year. As highlighted by industry sources, the gains came against a backdrop of stagnant growth in Western Europe and a significant downturn in new car registrations on the German market. In line with data from the AIA, car production rose by 9.66% in 2007 to 932,016 units. Skoda was the largest car producer, turning out 623,529 units, exceeding even its own forecasts for the year.

Faced with growing demand for its cars across Europe, the Czech carmaker decided to raise full-year production to 616,000 units. According to data from the European Automobile Manufacturers' Association ACEA, Skoda's new car registrations in Europe (EU+EFTA) edged up by 1.3% y-o-y to 468,628 units in 2007. The carmaker exported some 563,226 vehicles from the Czech Republic last year.

Toyota Peugeot Citron Automobile (TPCA), the second-largest carmaker in the country, made 308,478 units, with exports totalling 306,916 units. Other results include a massive 58.25% increase in truck production to 3,154 units, and a solid 13.87% rise in bus production to 3,357 units.