Bullish Outlook For Central And Eastern Auto Component Suppliers
We are increasingly bullish on auto component manufacturers in Central and Eastern Europe (CEE), and we expect to see continued investment into this segment.
As firms are increasingly keen to cut costs, we've seen automakers shift production away from high-cost Western Europe and towards lower-cost CEE.
This, combined with a return to growth in European car sales, has led to a resurgence in output volumes in CEE, and we expect the trend to continue.
Rising car production volumes are encouraging investment across the supply chain, as auto makers seek to increase the use of domestic components to reduce operating and manufacturing costs, overcome currency effects, and improve profitability.
Moreover, we've seen sustained improvements in the operating environments in many CEE countries. Wage costs are low, productivity is rising due to improvements in the labour force, and good transport infrastructure exists.
Also, we are seeing ongoing research and development (R&D) investment, helping these countries move up the global value chain.
A slowdown in Western European demand in the second half of 2014 will weigh on CEE car production (and hence component suppliers), but the outlook for the regional autos sector is more bullish than the broader macro picture, and the European passenger car market will likely register strong growth over the course of 2014.
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