Automotive FDI in Central and Eastern Europe

1. Automotive FDI in Central and Eastern Europe Ing. Tomas Dudas, PhD.

2. Global automotive industry • One of the most important and most globalized industries in the world economy • This industry is undergoing major changes from the 80s (the change of national automotive corporations into global champions) • Global mergers and acquisitions and strategic alliances (Renault-Nissan, DaimlerChrysler – which split several years later)

3. Global Players • GM (Cadillac, Chevrolet, GMC, Buick, Opel, Vauxhall, Holden) • Ford (Ford, Lincoln) • Chrysler(Chrysler, Dodge, Ram, Jeep) • Daimler (Mercedes-Benz, Smart)

4. Global Players • Toyota (Lexus) • Honda • Renault/Nissan • Volkswagen (VW, Škoda, Audi, Bentley, Seat, Bugatti, Lamborghini, Porsche) • Fiat (Alfa Romeo, Lancia, Ferrari, Maserati, Iveco) • PSA (Pegueot, Citroen) • Hyundai/Kia

6. Car production 2010 • Toyota 8,557,351 • GM 8,476,192 • Volkswagen 7,341,065 • Hyundai Motor 5,764,918 • Ford 4,988,031 • Nissan 3,982,162 • Honda 3,643,057 • PSA 3,605,524 • Suzuki 2,892,945 • Renault 2,716,286 • Fiat 2,410,021 • Daimler AG 1,940,465 • Chrysler 1,578,488

8. Automotive industry in CEE • The first attempts to construct automobiles occurred early in the 20th century – Czech republic, Hungary • 1920 – first joint venture (FIAT) • Skoda corporation becomes the most important automotive corporation in the region • After WWII the automotive industry is nationalized (with everything else) and central planning is introduced

9. Automotive industry in CEE • Škoda remained the most popular automobile producer in the region, but the quality of the cars decreased over the decades • Poland produced Fiats in joint venture • Hungary specialized itself as an autobus producer (Ikarus) • Slovakia did not have significant car manufacturing capacities

12. Automotive industry in CEE • The fall of the soviet regime brought huge problems into the automotive sector in CEE • The markets opened – and the domestic corporations realized that they are not competitive enough • They needed – capital and technology – they needed a foreign investor • Most of the FDI went into the Visegrad countries

15. Who is active in the region? • Volkswagen took over Czech manufacturer Skoda in 1991 and over the next eight years investedmore than DM2.4 billion in it. The company has also set up assembly and component manufacturing operations in Hungary, Poland and Slovakia. Its Audi division has invested in component manufacturing and assembly operations in Hungary. • Fiat began its restructuring of the Polish automotive group FSM in 1991 and acquired a 90 percent stake in it the following year.

16. Who is active in the region? • Suzuki set up production facilities in Hungary in 1992 and invested more than $400 million in them more than the remainder of the decade. • Daewoo acquired the Polish automotive groups FSC and FSO in 1996 and invested more than $1billion in these facilities over the next two years. The firm was one of the most aggressive investors in central and eastern Europe in the late 1990s,acquiring seven formerly state-owned auto plants across the region. Since the bankruptcy of parent company Daewoo Motor in 2000, the future of many of these plants is uncertain, although General Motors has expressed an interest in investing in some of these facilities.

17. Who is active in the region? • General Motors (through its Opel subsidiary) launched a bid for Poland’s FSO in the mid-1990s. When it lost out to Daewoo, GM decided to make a DM530 million greenfield investment in an integrated car plant in Poland. The company has also established production facilities in Hungary. • Toyota and Peugot made the largest-ever greenfield investment in the Czech Republic in 2002, investing more than Ä1.5 billion in a car manufacturing plant. Shortly afterward, Toyota also increased its investment in its existing component manufacturing operations in Poland. • PSA Peugot Citroën signed an agreement in January 2003 to build a greenfield production plant in Slovakia. The project is valued at 700 million EUR.

18. Hyundai/KIA – built two factories (Kia – Slovakia and Hyundai – Czech republic) • Renault – took over Revoz in Slovenia in the early 90s, in 1999 they acquired the Dacia factory in Romania and in 2008 25 % in AvtoVaz in Russia • Daimler Benz - built a new factory in Hungary in March 2012 (A-Class and B-Class)

20. Privatization vs. Greenfield • Privatization – VW (Czech republik), Fiat (Poland), Daewoo (Poland), Renault (Rumania a Slovenia) • Greenfield – GM (Hungary a Poland), Suzuki (Hungary), Audi (Hungary), PSA/Toyota (Czecg republic), PSA (Slovakia), Kia (Slovakia), Hyundai (Czech republic)

23. Why the V4 countries? • Stable economic and political environment • Nearness to the great markets in western Europe • Qualified labor force • Low labor costs – growing labor productivity • Flexible labor markets • EU membership • Attractive investment incentives

25. “Our major market is western Europe, and we have chosen this region primarily because of its location, its cheap labour force and profitable government incentives.” —Tokuichi Uranishi, managing director, European and African Operations, Toyota Motor Corporation

26. Where in V4? • In the early 90s Czech republic and Poland were the favourites – privatization of the existing capacities • Hungary became popular in the mid 90s – greenfield investments • Slovakia was not attractive those times • Late 90s and early 2000s – the FDI inflow in the industry is dominated by greenfield investments • Investment incentives play an ever increasing role – the offers of the competing states are often similar

27. Automobilový priemysel – pilier slovenskej ekonomiky

28. Slovakia – automotive stronghold

29. Number of employees in the Slovak automotive industry 2002-2009