Hungary Autos Report Q3 2011
Includes 3 FREE quarterly updates
In one of the most significant moves in Hungary’s auto sector in recent years, the Hungarian government granted state subsidies of HUF11.2bn (US$60.5mn) and HUF5.5bn (US$29.7mn) to the local operations of Audi and Opel respectively in April 2011, in an attempt to push the country's automotive manufacturing closer to its eastern European peers. The government is hoping that the subsidies – which will complement a combined EUR1.4bn (US$1.99bn) investment from the two carmakers – will help it increase its production capacity to a level close to that of Poland. Total vehicle production in Hungary increased an impressive 25.47% y-o-y, to 229,040 units, in 2010 and BMI expects carmakers to increase this further by at least 10% y-o-y, to 252,375 units, in 2011, thanks to the Audi and Opel investments.
Audi has huge expansion plans in Hungary and will be investing EUR900mn (US$1.31mn) to create a fully fledged vehicle plant in the country. Volkswagen’s luxury division planned the second phase of expansion at its Győr plant for 2017-2018. The first phase of the expansion will increase annual production at the plant to 125,000 vehicles from 2013 and will generate 1,800 new jobs. Opel, meanwhile, will use its EUR500mn investment (US$713.7mn) to expand the engine operations of its Szentgotthárd plant in south west Hungary towards the end of 2012 and see annual production capacity reaching 500,000 units.
However, the country's banking sector is facing pressure from a new windfall tax on their balance sheets, which combined with a rising proportion of bad loans, will make it difficult to get car credit. Although the overall rate of non-performing loans (NPLs) for vehicle leasing firms eased to 7-8% in April 2011, the country has some way to go before consumers step up car purchases.
We therefore expect sales to grow a cautious 18.84% y-o-y, with 62,594 units shifted in 2011, which is a negligible growth compared with the near 80% fall in the market between 2004 and 2010. Mostly helped by this low base effect, the market growth should average 17.6% y-o-y between 2012 and 2015.
BMI sees upside risks to these forecasts over the next two years as the government recently outlined its plan to reduce the lower rate of income tax from 17% to 16% as part of its 2011 budget. However, the government also plans to increase the income tax burden in the medium-term in an effort to boost revenue. The government is expected to use a phased approach to removing tax relief, beginning as early as 2012 and inevitably weighing on sales. Local reports in claim that employees on the minimum wage could see their income tax increase to as much as 16% by 2014, up from just below 3% in 2009.
Moreover, unemployment continued to worsen in early 2011, with the jobless rate jumping to its highest level in almost 12 months to 11.5% between December 2010 and February 2011, exacerbating weak credit growth in terms of auto sales. After dropping to 9.82% in 2012, BMI does not expect vehicles sales growth to accelerate significantly until 2014. By 2015, we expect to see sales growth to come in at 22.6%, to 118,778 units, considerably below pre-crisis levels.
In one of the most significant moves in Hungary’s auto sector in recent years, the Hungarian government granted state subsidies of HUF11.2bn (US$60.5mn) and HUF5.5bn (US$29.7mn) to the local operations of Audi and Opel respectively in April 2011, in an attempt to push the country's automotive manufacturing closer to its eastern European peers. The government is hoping that the subsidies – which will complement a combined EUR1.4bn (US$1.99bn) investment from the two carmakers – will help it increase its production capacity to a level close to that of Poland. Total vehicle production in Hungary increased an impressive 25.47% y-o-y, to 229,040 units, in 2010 and BMI expects carmakers to increase this further by at least 10% y-o-y, to 252,375 units, in 2011, thanks to the Audi and Opel investments.
Audi has huge expansion plans in Hungary and will be investing EUR900mn (US$1.31mn) to create a fully fledged vehicle plant in the country. Volkswagen’s luxury division planned the second phase of expansion at its Győr plant for 2017-2018. The first phase of the expansion will increase annual production at the plant to 125,000 vehicles from 2013 and will generate 1,800 new jobs. Opel, meanwhile, will use its EUR500mn investment (US$713.7mn) to expand the engine operations of its Szentgotthárd plant in south west Hungary towards the end of 2012 and see annual production capacity reaching 500,000 units.
However, the country's banking sector is facing pressure from a new windfall tax on their balance sheets, which combined with a rising proportion of bad loans, will make it difficult to get car credit. Although the overall rate of non-performing loans (NPLs) for vehicle leasing firms eased to 7-8% in April 2011, the country has some way to go before consumers step up car purchases.
We therefore expect sales to grow a cautious 18.84% y-o-y, with 62,594 units shifted in 2011, which is a negligible growth compared with the near 80% fall in the market between 2004 and 2010. Mostly helped by this low base effect, the market growth should average 17.6% y-o-y between 2012 and 2015.
BMI sees upside risks to these forecasts over the next two years as the government recently outlined its plan to reduce the lower rate of income tax from 17% to 16% as part of its 2011 budget. However, the government also plans to increase the income tax burden in the medium-term in an effort to boost revenue. The government is expected to use a phased approach to removing tax relief, beginning as early as 2012 and inevitably weighing on sales. Local reports in claim that employees on the minimum wage could see their income tax increase to as much as 16% by 2014, up from just below 3% in 2009.
Moreover, unemployment continued to worsen in early 2011, with the jobless rate jumping to its highest level in almost 12 months to 11.5% between December 2010 and February 2011, exacerbating weak credit growth in terms of auto sales. After dropping to 9.82% in 2012, BMI does not expect vehicles sales growth to accelerate significantly until 2014. By 2015, we expect to see sales growth to come in at 22.6%, to 118,778 units, considerably below pre-crisis levels.
Contents
Executive SummarySWOT Analysis
Hungary Auto Industry SWOT
Political SWOT
Economic SWOT
Business Environment SWOT
Regional Overview
EU Visualises An Oil-Free Future, But Will The Industry Accept It?
Table: EU Action Plan For Electric Vehicles
Table: Europe – Top Automotive Suppliers Sales By Region (US$mn), 2010
Table: BMI Industry Risk-Reward Ratings For Autos In Europe
Industry Forecast Scenario
Production And Sales
Table: Hungary Auto Production
Table: Hungary Auto Sales
Trade
Trade
Macroeconomic Forecast Scenario
Table: Hungary – Economic Activity
Competitive Landscape
Fresh Investment
Industry News
Company Monitor
PSA Peugeot Citroën Regional Profile . Error! Bookmark not defined.
Financial Woes . Error! Bookmark not defined.
Focus On Faurecia . Error! Bookmark not defined.
Merger Opportunity Error! Bookmark not defined.
Eye On Eastern Europe Error! Bookmark not defined.
Company Profiles – Manufacturers
Magyar Suzuki
Audi Hungaria Motor
Company Profiles – Suppliers
Rába Járműipari
Delphi Automotive
Country Snapshot: Hungary Demographic Data
Section 1: Population
Demographic Indicators, 2005-2030
Rural/Urban Breakdown, 2005-2030
Section 2: Education And Healthcare
Education, 2002-2005
Vital Statistics, 2005-2030
Section 3: Labour Market And Spending Power
Employment Indicators, 2001-2006
Consumer Expenditure, 2000-2012 (US$)
Average Annual Wages, 2000-2012
BMI Methodology
How We Generate Our Industry Forecasts
Sources Skip to top