Hungary Autos Report Q2 2008

BMI has raised its 2008 forecast for car production in Hungary, after output soared in 2007. According to data from the International Organisation of Motor Vehicle Manufacturers (OICA), car production reached 287,982 units last year, a significant increase of 53.5% on 2006. As BMI reflects in the latest Hungary Autos Report, car production in the country is being boosted by the participation of industry majors such as Audi. This, in turn, is fuelling growth in the supply sector.

Audi made 56,982 units at its plant in Gyor in 2007, up by a massive 140.7% on the previous year. Of this total, 40,417 units were Audi TT Coup vehicles, 16,349 units were Roadsters and 216 units were A3 Cabriolet vehicles. Engine production at the plant edged up by 1.03% year-on-year (y-o-y) to 1,913,053 units. The strong upturn in vehicle production has been attributed to the worldwide success of key models and, in BMI's view, the Hungarian plant should continue to be fundamental to the German carmaker's plans to build 1.5mn vehicles by 2015. BMI's forecast for car production in 2008 now stands at 331,108 units.

Fresh investment this quarter comes in the car parts sector and reflects just how much this industry is growing as vehicle manufacturers set up plants in Eastern Europe in order to take advantage of cheaper costs. Hungary is geographically well placed to supply neighbouring markets and, according to industry sources, the Indian company Apollo Tyres has unveiled investment of EUR300mn in order to build a manufacturing plant in the country. The investment is the biggest ever made by an Indian company in Hungary. Construction of the plant is expected to begin in April 2008, with production beginning some 18 months later. In a boon to the chosen location for the plant, Gyngys, which has a high level of unemployment, some 1,500 new jobs will be created. Establishing a plant in Hungary is a key part of Apollo's global expansion strategy, say company sources. A Hungarian base will allow the manufacturer to supply markets in Europe and North America.

Also, German car parts maker Continental AG is preparing to build a testing ground for electronic braking systems (EBS) and related components in Hungary. The site will be created on the back of a billion-forint investment and is expected to be the biggest of its kind in Central and Eastern Europe.

Construction of the testing ground is scheduled to be completed by the end of 2008, with the creation of some 30 jobs.