Volkswagen unit Audi has announced plans to invest almost EUR900m in its Hungarian operations during the next three years, as it expands its production plant in Gyor. just-auto, with the help of Business Monitor International, takes the opportunity to look deeper into the Hungarian auto market.
Strengths
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- Completely built unit (CBU) assembly is well established and foreign majors are increasing their commitment, especially in the supplier segment.
- The key players – with reference to both CBUs and the components sector – have invested heavily in an export drive.
- Despite the obvious weaknesses exposed by the global crisis, Hungary remains a very attractive location mainly due to its comparative advantages across a range of costs/skills ratios in Central and Eastern Europe (CEE).
Weaknesses
- New car sales remain weak as government policies squeeze consumer spending.
- Poor economic backdrop could continue to pressure new car sales.
- Export growth has been partially maintained by scrappage schemes in Western Europe, which are now expiring.
Opportunities
- Subsidies and incentives are available as a means of attracting foreign producers.
Threats
- A prolonged downturn in Hungary’s key export markets could reach tipping point if government funds mainly from the IMF and other support to underpin the domestic autos market are stretched by further weakness in public finances.
- With car production increasing rapidly in other new EU member states, including Slovakia, the Czech Republic and Poland, there is a danger that there will not be enough demand to absorb big increases in regional car supply.
- The above-mentioned danger is compounded by the sluggish nature of real economic growth at the core of the eurozone.
- Relatively poor business environment could jeopardise potential investment.
- Uncertainty regarding the incoming government’s fiscal policy.
- Domestic demand may be limited by both a ban on foreign currency mortgages and an unprecedented taxation levy on the financial sector.
For more information on Business Monitor International’s report Hungary Autos Report Q4 2010, click here.
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