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Global carmakers eyeing Eastern Europe

Japan-based carmaker Mazda Motor Corporation recently caused a stir by announcing it was contemplating a new auto plant in Eastern Europe.

Although the suggestion was later withdrawn by the company, it had sparked a discussion of how many carmakers Central and Eastern Europe can accommodate. Our present priorities include increasing manufacturing capacities in Japan and China, but we are considering production in Eastern Europe,” Daniel Morris, president and CEO of Mazda Motor Europe, told the German automotive magazine Automobilwoche at the end of October, citing growing demand for cars in Russia and other Eastern European countries as the reason.

His words are supported by the economic results of the carmaker in Russia, where sales have grown by dozens of percent last year and this year. Analysts named Ukraine and Russia as the most likely target countries for a new factory, but did not exclude the Czech Republic. Just a few days later, however, Mazda rebutted the statement made by its European CEO. „That’s not under consideration,” said a spokeswoman for Mazda in Tokyo, adding that the corporation was focused on developing a new plant in Thailand, built jointly with US-based Ford Motor Company.

Globally, Mazda intends to focus on the modernization of its existing plants rather than developing new ones. Morris also told news agency Reuters that he had been misquoted, and Mazda was content with its global capacity levels. Automobilwoche pointed out that the demand for passenger cars was enormous in both Western and Eastern Europe, and that the manufacturing capacities in the Continent were stretched to their limits. The demand raises the question of how many new plants, if any, will be needed in Europe. According to a study called Global Automotive Financial Review by consultancy PricewaterhouseCoopers, the global production of passenger cars is to increase between 2006 and 2014 by 19% to reach 78 million units (up from 65.2 million in 2006).

Although China, India and other developing countries are to be the greatest contributors to this growth, developed markets will still represent a full third of the total growth. It is expected that manufacturers based in the European Union will improve the efficiency of their EU plants by 2014 by some 7%, which is more than plants in North America. The EU, as the fastest growing global market, is expected to increase production of passenger cars by the year 2014 by 2.7 million units. According to the study, the expected increase of car production in EU countries will stem from a revival of traditional car brands and production in countries with a tradition of car production.

Germany and Slovakia to grow fastest
Production in Germany is expected to rise by 900,000 cars by the year 2014, marking the highest increase among EU countries. In Slovakia, the second fastest-growing country, car production is to rise by 500,000 units. According to the study, total EU production is to increase by 2.4 million cars by the year 2014, exceeding 20 million cars made annually. This increase is partially due to the growing demand for cars in new member states that can support production growth by as much as 1.5 million cars.

Other contributing factors include growing exports and increased demand of Europeans for quality car makes. „According to our survey, Central and Eastern Europe should be the target for car production to the value of $6 billion (€ 4.08 billion). A considerable share of these investments is likely to end up in the Czech Republic, Poland, Slovakia, Hungary and Romania, while the majority of cars will be made in the Czech Republic and Slovakia,” said Stephen Booth, a partner at PricewaterhouseCoopers Česká republika (PwC ČR).

The figures include counting both direct car production and automotive suppliers. His colleague agreed. „A marked increase in production capacities will take place in the Czech Republic mainly due to the Hyundai Motor Manufacturing Czech plant in Nošovice [North Moravia], but positively, the planned expansion of Škoda Auto plants in Vrchlabí and Kvasiny [East Bohemia] will contribute as well,” said Marek Romancov, a senior manager at PwC ČR. Planned production capacity at Nošovice should reach 300,000 cars per year. (cbw)