Volkswagen AG faces no serious challenger in cruising to its fifth straight year as market leader of Eastern Europe, but the open road to victory is increasingly rocky.

In January-to-September 2000, the German group even widened its edge over the closest competitors, while a slump in overall regional sales worsened, according to an exclusive survey by just-auto.com.

Next year, though, the balance of power could shift. Before collapsing, Daewoo Motor Co Ltd had been aggressively battling to dominate Eastern Europe, ending 1999 only 21,069 sales short of toppling VW. The bankrupt Korean producer, now threatened with liquidation, likely will be sold to another automaker. The buyer, perhaps General Motors Corp or Hyundai Group, would be poised immediately to overtake the Germans.

Depression deepens

Nine-month sales dove 13.0% to 892,493 in 2000 from 1,026,212 in 1999 for 11 countries reporting reliable statistics - Bulgaria, Croatia, Czech Republic, Estonia, Hungary, Latvia, Lithuania, Poland, Romania, Slovakia and Slovenia.

The downturn follows declines of 8.3% in first-quarter 2000 and 10.4% in first-half 2000. Demand typically rises in the fourth quarter with businesses and consumers scurrying to buy new vehicles with spare cash that will be taxed, unless spent before the new year. But 2000 seems destined to end in the red, the first annual fall in sales since 1992.


"the balance of power could shift"

This survey covers new vehicles not over 3.5 tonnes gross weight. The results are based on provisional data consolidated from a variety of sources - automakers and their dealers and importers plus auto associations, government statistical bureaux, independent market observers and media.

VW buoyant in sinking market

VW, also the dominant player in Western Europe for 10 years, weathered the adversity relatively well. Its nine-month volume dipped only 3.2% to 200,742 in 2000 from 207,440 in 1999, enabling its market share to float to 22.5% from 20.2%.

The company's fall was cushioned by a healthy recovery in its main market, the Czech Republic, home to Skoda. The Czech brand generated 62.1% of total turnover of the German group, also comprising Audi and SEAT plus exclusive lines Bentley, Bugatti, Lamborghini and Rolls-Royce.

Fiat SpA, first in sales in Eastern Europe from 1993 to 1995, reversed a nagging slide in its rank, regaining second place from an emasculated Daewoo. But the Italians, third behind the Koreans since 1998, still suffered the brunt of the market malaise. Turnover tumbled 15.2% to 137,679 in 2000 from 162,408 in 1999, while share ebbed to 15.4% from 15.8%.

The Italian group (Fiat plus Alfa Romeo, Ferrari, Iveco, Lancia and Maserati) is the unrivalled veteran of Eastern Europe. In the 1920s, it helped create the auto industry in Poland, and it still owns the biggest car-making complex there. However, since the end of Communism, Fiat has not diversified its manufacturing presence in the region, and it has lost ground to expansionists like Daewoo and VW. Neither built vehicles in countries in this survey before 1990. Now the Germans produce in Czech Republic, Hungary, Poland and Slovakia. The Koreans operate in Czech Republic, Poland and Romania.

Daewoo's days of reckoning

A Daewoo Nubira

The major player hit hardest by market turbulence has been Daewoo. Its performance in Eastern Europe once seemed immune to its fight against financial ruin in Korea, and the company appeared ready to rout VW over much of 1998 and 1999.

Daewoo enjoyed seven years of astonishing conquest sales in the region, but it seems to be surrendering gains as fast as it achieved them. Nine-month turnover plunged 33.1% to 131,793 in 2000 from 197,116 in 1999. Market share recoiled to 14.8% from 19.2%, the biggest contraction of any auto group.

As concerns about the company's future intensified at the end last year, consumer confidence in Daewoo started to wither across Eastern Europe, especially in the largest market Poland, where the automaker has its biggest factories in the region.

French connections

Renault SA, merely a moderate force in Eastern Europe in the 1990s, finished last year a regional powerhouse, thanks to its acquisition of SC Automobile Dacia SA of Romania. But sales of the French group dumped 19.6% in January-to-September 2000, as 8.4% growth in the Renault marque was erased by a 45.0% collapse in Dacia.


"The major player hit hardest by market turbulence has been Daewoo"

After Renault pledged in late 1999 to modernise Dacia's outdated products, tens of thousands of Romanian consumers chose to postpone purchases of the domestic vehicles, preferring to wait for improved offerings. A boost in sales should follow the launch in October of SuperNova, an upgrade of Dacia's Nova sedan. But many buyers are interested most in an all-new model to be introduced in 2003 with a base price of Euro5,000.

PSA Peugeot Citroën soared 23.2%, the best growth in the region of any auto concern. The surge reflects the popularity of the small Peugeot 206. Ironically, the French combine is one of only two groups from Western Europe not to build cars in the old East bloc. The other is MG Rover Group Ltd.

Besides PSA, the only major players to boost sales in January-to-September 2000 were DaimlerChrysler AG (9.1%), Toyota Motor Corp (7.7%) and Nissan Motor Co Ltd (1.7%).

The Big Three

Daewoo, Fiat and VW alone sold over 100,000 in January-to-September 2000 - together corralling 52.7% of regional demand. After them were Renault (97,785), PSA (69,610), GM (67,045), Ford Motor Co (37,079), Hyundai (27,805), Toyota (24,535), Suzuki Motor Corp (24,104) and Nissan (15,025).

SALES
Q1 2000
Year/Year
Q1-Q2 2000
Year/Year
Q1-Q3 2000
Year/Year
Groups
Units
% Change
Units
% Change
Units
% Change
Volkswagen
63,362
-4.8
136,609
-5.4
200,742
-3.2
Fiat
52,942
-2.2
100,605
-10.4
137,679
-15.2
Daewoo
44,316
-26.9
91,416
-26.9
131,793
-33.1
Renault
29,592
-26.2
69,861
-19.4
97,785
-19.6
Peugeot Citroen
23,384
39.8
49,730
29.7
69,610
23.2
General Motors
21,654
-0.3
47,118
-10.8
67,045
-16.5
Ford
13,249
-17.2
25,303
-24.8
37,079
-25.3
Hyundai
9,496
5.0
19,602
0.4
27,805
-1.1
Toyota
7,781
17.8
16,456
10.3
24,535
7.7
Suzuki
8,529
-8.2
15,949
-18.7
24,104
-16.9
Nissan
5,065
7.2
10,834
9.0
15,025
1.7
DaimlerChrysler
3,473
1.9
7,872
10.3
11,758
9.1
Honda
3,474
-21.0
6,957
-37.2
9,804
-36.3
Mazda
2,672
-10.7
5,703
-14.2
8,902
-5.9
Mitsubishi
1,570
-4.8
2,422
-36.1
3,788
-0.8
Other
4,563
19.4
17,444
69.4
25,039
46.7
TOTAL
295,122
-8.3
623,881
-10.4
892,493
-13.0
Source: just-auto.com

But uncertainty over Daewoo complicates the competitive landscape.

If GM buys the Korean company, its market share in Eastern Europe would nearly triple to 22.3% with sales of 198,838, only 1,904 behind VW, based on results from January-to-September 2000.

This would concentrate to 60.2% the market share of the Big Three (thereby Fiat, GM and VW). But the US automaker owns 20.0% of the Italians, who in turn hold 5.0% of GM. So the Fiat-GM alliance alone would control 37.7% of sales. Anti-monopoly concerns could arise, especially in Poland, where Daewoo, Fiat and GM each run major plants.

If Hyundai buys Daewoo, its market share in Eastern Europe would nearly quintuple to 17.9% with sales of 159,598, still 41,144 behind VW, though 21,919 ahead of Fiat.

(The favourable impact on the market share of GM and Hyundai is underestimated here, as the calculations capture Daewoo at its nadir.)

But potential suitors for Daewoo have been wary of absorbing the full palette of factories (many under-utilised), so the automaker's creditors may break apart the company to offer different chunks to separate bidders. Under a scenario now favoured, GM would acquire the Korean operations, while Hyundai would purchase Daewoo's foreign plants, including sites in Eastern Europe.

An example of a Dacia

If this split sale occurs, Daewoo's role in Eastern Europe likely would diminish because Hyundai would replace models built at factories there with its vehicles, though GM still would export Daewoo-brand cars to the region from the Korean plants.

Polish rule

Among countries, Poland continued to dominate, despite an 18.9% drop in nine-month volume to 419,548 in 2000 from 517,091 in 1999. It still represented a remarkable 47.0% of regional sales, and it was the eighth-largest market for autos in Europe - ahead of Belgium, behind the Netherlands.

Slovenia remained the most developed market in the old East bloc. In sales per 1,000 people for January-to-September 2000, Slovenia boasted 27.2 units. This compares with 11.7 in Czech Republic, 11.4 in Hungary, 10.9 in Poland, 10.1 in Croatia, 8.0 in Slovakia, 6.8 in Estonia, 2.6 in Romania, 2.3 in Latvia, 1.4 in Lithuania and 1.2 in Bulgaria.

But Slovenia, home to only 2.0 million people, followed its best year of 1999 by retreating 21.2% in January-to-September to 54,439 in 2000 from 69,099 in 1999.

Hungary built on gains in 1999, its strongest year since the end of Communism. Nine-month sales climbed 4.3% to 117,582 in 2000 from 112,743 in 1999. Among the 11 countries, Hungary ranked fourth in growth rates, behind smaller markets Estonia (43.3%), Lithuania (23.6%), Bulgaria (15.5%) and Croatia (6.3%).

Romania bore deep scars from the beating to Dacia, alone accounting for 75.0% of all demand there last year. Nine-month totals for the market plummeted 32.5% to 58,680 in 2000 from 86,919 in 1999, the steepest percent drop in Eastern Europe.

SALES
Q1 2000
Year/Year
Q1-Q2 2000
Year/Year
Q1-Q3 2000
Year/Year
Markets
Units
% Change
Units
% Change
Units
% Change
Poland
149,187
-6.0
299,405
-12.5
419,548
-18.9
Czech Rep
40,124
17.1
85,359
6.0
121,141
1.0
Hungary
36,954
12.1
78,952
8.8
117,582
4.3
Romania
15,034
-53.5
40,466
-34.5
58,680
-32.5
Slovenia
20,274
-11.3
40,422
-27.5
54,439
-21.2
Croatia
12,504
-32.1
30,094
3.2
46,827
6.3
Slovakia
11,882
-21.1
28,333
-21.2
42,740
-12.1
Estonia
3,117
83.8
6,733
40.6
10,329
43.3
Bulgaria
3,068
8.7
6,561
15.1
9,852
15.5
Latvia
1,553
-4.0
3,815
-23.9
6,086
-21.8
Lithuania
1,425
26.2
3,741
34.8
5,269
23.6
TOTAL
295,122
-8.3
623,881
-10.4
892,493
-13.0
source: just-auto.com

Contact Ryan James Tutak, associate editor of just-auto.com for Eastern Europe
E rjt@pronet.hu
F +36-1 / 317-7257
T +36-1 / 266-2693