Slovakia Autos Report Q2 2008

Vehicle production in Slovakia almost doubled last year, although the total fell below BMI's full-year forecast. According to industry data, Volkswagen, PSA Peugeot Citron and Kia made 572,000 units in 2007, against 295,391 units a year earlier. As BMI illustrates in the latest Slovakia Autos Report, the outlook in terms of production over the forecast period up to 2012 is extremely positive, with certain carmakers planning to raise production in 2008.

In 2007, vehicle production accounted for one quarter of Slovakia's GDP and one third of total exports.

Peugeot Citron's output more than trebled at its plant in Trnava to more than 177,000 units. Initial estimates from VW's plant in Bratislava are that production reached 250,000 units in 2007, against 240,000 units in 2006. Kia turned out 145,000 units after surging production led the carmaker to add an extra shift last year.

PSA and Kia are reportedly planning to reach full annual capacity of 300,000 cars by 2009 or 2010.

Forecasts from PSA are particularly encouraging, with the manufacturer planning to slightly raise output in 2008 to 200,000 cars per year. The company is also preparing to add a new model to the assembly line in early 2009, ahead of schedule. Kia, for its part, is forecasting an increase of around 55% to 225,000 units, while VW expects to produce some 250,000 units this year.

BMI is forecasting total automotive output of 843,600 units for 2008. Strong levels of sales growth in other Eastern European countries could see our expectations being met. The participation of industry majors in the sector confirms Slovakia's status as a manufacturing hub and the country's score on BMI's new Business Environment Ratings Index.

Ranked fourth, Slovakia is set to become the region's automotive hub, due to investment in new plants by VW, Kia and Peugeot Citron. Slovakia has managed to beat Poland and the Czech Republic in terms of securing large-scale investment in the industry due to its low wages, low taxes and growing manufacturing base. The country also benefits from a relatively attractive regulatory environment, strong economic infrastructure and political stability. However, it has a relatively small market and low vehicle ownership rates which push down its score, although these are set to improve over the next five years.