Bulgaria and the Czech Republic are set to become the 'road kings' amongst the auto producers and component suppliers market segment in the Central and Eastern Europe region, according to a report released by Colliers International at Expo Real.
The auto producers and component suppliers sector is very important in CEE industrial and is growing. Auto exports ranged from 4.7% of total exports in 2015 in Bulgaria, upwards to 28.0% in Hungary and 34.6% in Slovakia, growing at a regionally-weighted annual rate of 7.4% in the 2010-15 period.
Six countries of the CEE (CEE-6) generated €134 bn of auto exports in 2015. The Colliers' report, The Road Kings: CEE Autos, suggests that even moderate reinvestment and expansion capital expenditures are likely to sustain auto take-up in the region at over 1.1 million m2 in 2017 800,00 m2 in 2018.
Colliers says that the conditions for locating fresh auto supplier production remain in place in most of the region. The price of labour is very low, the availability more plentiful the farther east one travels. Our overall survey assessment is that Bulgaria and the Czech Republic are most attractive within CEE-6 for a new auto supplier, though none of the countries score poorly.
CEE-6 autos have a high weight of internal combustion engine (ICE) production/component supply. This dependency, most acute in Hungary and Slovakia, is likely to require addressing in the mid-term, as manufacturers shift towards electric car production globally. Opportunities for other suppliers are likely to arise, as evidenced by recent investments such as Samsung SDI’s battery plant in Hungary.
Labour force price is the CEE’s main competitive advantage. The workforce education/skill levels are seen as very important in determining the location of auto players by our industrial agents in Slovakia and Hungary and important in Bulgaria.
Wage growth is accelerating (between 7.9% and 14.1% in the Industrial sector in the region in Q2 2017), a factor that we believe will sustain at least into 2018. Labour markets are tight. Evidence includes, first, that all the CEE-6 countries have low unemployment levels versus their history (and Czech Rep. with the lowest in the EU at just 2.9% according to Eurostat). Labour shortages are acting to constrict expansion of production.
Mark Robinson, senior researcher, CEE, Colliers International, explains: 'So it might be the availability rather than the cost of labour that becomes more of an issue. This can be resolved partially by education and training of the workforce, something being addressed to varying degrees across the region and partially, as we set out in our July 2017 report “Labour Force Boomerang” by return migration of some of the 7m CEE-6 nationality workers currently residing in Western Europe.'
