Ten years after the fall of communism, Eastern Europe remains in a state of transition with markets fluctuating drastically year to year.
The region is seeing sales booms and busts across the board. In Romania, car sales will drop 21.3% this year but jump 28.5% in 2001, according to Standard & Poor's DRI. It's the opposite story in Turkey, where a projected 76.6% increase in 2000 will turn into a 9.2% plunge next year.
The volatility of the Eastern European market can be blamed on a revolving cycle of ever-changing tax policies - coupled with recessions and weakened economies - and spurts in consumer spending that often are triggered by new model introductions.
But the ups and downs don't appear to be keeping carmakers and suppliers at bay. Among the new operations springing up areCorp.'s Agila assembly plant in Poland and Audi AG's TT facility in Hungary. And AG has signaled it may build its '03 small car in Eastern Europe as well.
Adding to the intense interest in the region is the up-for-grabs future of one of its biggest players - Daewoo Motor Co. Ltd.
Motor Co.'s decision to back out of talks to buy the Korean automaker has opened the door to a bid by an allied GM and SpA. Unlike Ford, however, both GM and Fiat already have large operations in the region, and it is uncertain whether Daewoo's facilities in Uzbekistan and Poland would be absorbed easily.
The question marks about its future have left Daewoo battered in Poland, where it has been in a tooth-and-nail struggle withfor the No.1 sales spot. A bevy of new models had Daewoo wresting the top spot from Fiat during 1999. But as the Korean automaker's financial position weakened, more and more customers turned to other brands. As a result, Fiat has regained leadership with 29% of the market at the halfway point of 2000, a nearly seven point lead on Daewoo that the Italian carmaker is unlikely to relinquish.
It's a similar scenario in Romania, where customers are delaying purchases as they await new products from local automaker Dacia.SA, which now holds a majority of Dacia, is embarking on a $260 million modernization plan targeted to push production to 200,000 units annually by 2010 and make Dacia Renault's key emerging markets brand. The first stage calls for updates to existing Dacia vehicles, themselves originally based on Renault models. By 2003, Dacia will unveil a new $6,000 vehicle.
But it's Poland that is getting the lion's share of attention in Eastern Europe. It is the sixth leading market in all of Europe and the 12th largest in the world. And with an expected 5% per annum growth rate in gross domestic product, Poland has one of the strongest economies in Eastern Europe, based on data from the Economist Intelligence Unit.
"Poland is a big market and could be a very big market," says Tadashi Arashima, vice president and chief coordinating executive forMotor Europe. Toyota is eagerly awaiting the opening of its Polish transmission plant in 2002 as a way to cut the cost of building cars in the U.K. And it also is looking to Poland, along with the Czech Republic and Hungary, to expand its European sales base.
Suppliers also are concentrating there.
"With new car sales, Poland has very dynamic growth," says Leszek Waliszewski,Automotive Systems Inc.'s country director. Delphi chose Poland as the site of its latest technical center and will coordinate its Eastern Europe growth from there. In Poland only since 1994, the world's No.1 supplier now has five plants in the country.
"(Central Europe) is an area of growth," says Roger E. Hoke, chief engineer-dampers, forin Poland. "You have to go where the growth is."