Its time to stop thinking of central and eastern Europe as remote emerging markets. Theyre already here.
Most big markets in the East are in the European Union, and Romania and Bulgaria are scheduled to join in 2007.
Traditional European automakers and suppliers started a rush eastward in the late 1980s as the Soviet bloc broke up. They havent stopped.
The flood of investment into new or expanded parts factories, powertrain operations and assembly plants in central and eastern Europe has continued even though local new-car markets have developed slower than expected.
Carmakers are sensitive to criticism that they are hollowing out their core western European auto manufacturing. So they often say they are building capacity in the East to satisfy future local demand.
Maybe so, but the idea that East and West can remain separate domains is being quickly debunked. Volkswagen groups Skoda brand is no longer cheap and its largest single market is Germany.
Renault positions its Romanian-made Logan downmarket from Renault. But its not just Romanians buying the car. The French are interested too.
EU accession has upended the automotive status quo on both sides of the former iron curtain. Say hello to the common market – and get ready for free movement of goods. As ACEA Secretary General Ivan Hodac says: You cant be able to move a shirt around the EU and not move a car.
And whatever automakers say about meeting local demand with locally built cars, they know that low wages save money on car assembly.
Skilled workers in the East earn E2.50 to E7 an hour, compared with the western European average of E24 an hour. Building a car in the Czech Republic, Slovakia, Poland, Hungary or Romania can cost up to 15 percent less than in Germany or France. Add workforce flexibility to the mix and the East looks even better.
As capacity surges in the region, carmakers and suppliers will also save on logistics. VW Bratislava purchasing director Wolfgang Rohroff offers a way around the high cost of shipping components across Europe to Slovakia: make them nearby and save shipping costs.
The east has arrived. And it will grow.
E-mail Correspondent Lyle Frink at [email protected].