Hyundai Output To Remain At Full Throttle

Korea n auto manufacturer Hyundai Motor plans to maintain full capacity of some 300,000 units at its plant in the Czech Republic in 2013 and over the coming years. BMI expects the brand to continue to outpace the European passenger car market, and that robust sales in this key export market, along with diversification into high-growth emerging markets, will continue to drive production volumes at its Czech plant.

Export-Driven Growth Expected To Stay

The plant opened in 2008 and produces the i30 compact car, ix35 compact SUV, and ix20 subcompact minivan. Output reached 303,035 units in 2012, its first year of operating at maximum capacity. The majority of the plant's output is for export, predominantly to Europe. Over the first eight months of 2013, the broader European passenger car market registered a 5.2% year-on-year (y-o-y) downturn. Over this period, Hyundai registered a 2.7% y-o-y decline; this year-to-date figure was brought down by a 5.3% y-o-y decline in August, and we expect the brand's sales to pick up as the regional market continues to improve.

Korea n auto manufacturer Hyundai Motor plans to maintain full capacity of some 300,000 units at its plant in the Czech Republic in 2013 and over the coming years. BMI expects the brand to continue to outpace the European passenger car market, and that robust sales in this key export market, along with diversification into high-growth emerging markets, will continue to drive production volumes at its Czech plant.

Export-Driven Growth Expected To Stay

The plant opened in 2008 and produces the i30 compact car, ix35 compact SUV, and ix20 subcompact minivan. Output reached 303,035 units in 2012, its first year of operating at maximum capacity. The majority of the plant's output is for export, predominantly to Europe. Over the first eight months of 2013, the broader European passenger car market registered a 5.2% year-on-year (y-o-y) downturn. Over this period, Hyundai registered a 2.7% y-o-y decline; this year-to-date figure was brought down by a 5.3% y-o-y decline in August, and we expect the brand's sales to pick up as the regional market continues to improve.

In 2012, the European passenger car market declined 7.8%, but Hyundai registered 9.4% growth over the year. BMI has previously highlighted the relatively robust demand for small, cheap cars in Europe, and we expect this to continue to play out as consumers remain price-conscious .

We expect to see modest sales increases in Europe in 2014 due to pent-up demand in the regional market. We believe Hyundai is well placed to benefit from this resurging market, and expect the company to continue to outpace growth in the segment.

Fluctuations in demand in Europe have driven production volumes for Hyundai's Czech factory. The brand's output over the first eight months of 2013 declined 2.6% y-o-y, to 200,282 units; we believe this modest decline is partly due to base effects (as the site ran at maximum output in 2012), and slightly lower sales volumes in the main trading partner, Europe.

The company has stated that it intends to maintain full production at the site regardless of sales figures in Europe, as it could increase export volumes to other markets, including Australia and South Africa. BMI has highlighted that a number of mass market manufacturers are increasingly seeking to shift their strategic focus away from the declining European market; utilising existing production facilities in the region to export to higher-growth markets elsewhere. We expect this to continue as producers seek to diversify their global growth strategies.

As Hyundai's sales in Europe pick up, and exports continue to diversify away from Europe, we expect the company's output to reach 2012 levels by the end of the year.

Czech Production Outlook

Three international auto manufacturers currently operate in the Czech Republic: Hyundai; Volkswagen's Czech unit Skoda; and a joint venture between Toyota and PSA Peugeot Citroen. Over the first eight months of 2013, light vehicle production in the country declined 8.6% y-o-y, to 734,873 units. BMI forecasts an 8% decline in passenger car output in 2013 as the European autos market continues to register modest improvements but sales volumes remain low.

In 2014, we forecast 1.4% growth in passenger car output on the back of a strong export outlook. We expect the European market to register positive growth and the three companies operating in the country continue to diversify into exporting to higher-growth emerging markets.

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Sector: Autos
Geography: Czech Republic
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