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back to index backEUROtalk May,  2005

Region in Focus: Eastern Europe

East Europe is shaping up as the next frontier. Following the accession Central European states to the EU in May 2004, focus is moving to the boundaries beyond the EU. East Europe can provide the same combination of low-cost manufacturing and market growth potential as CE did in the 1990s.

•  Historically, the region has been treated with caution. Economic instability in the early 1990s, and the extreme price-sensitivity of the market, limited growth. Automakers entering the region did so through agreements with local assemblers, often involving kit assembly of obsolete western products. The limited initial ambitions of the global players, together with tariff and trade barriers, meant that indigenous assemblers continued to dominate the market.

•  A turning point came in the early-2000s. The success of the GM-AvtoVAZ joint venture and Ford's operation at St Petersburg has encouraged other automakers to invest in Russia, or look seriously at doing so. Despite Turkey's 2001-2 economic crisis, the country's value as an export base has driven considerable inward investment. Ukraine has also posted recent impressive growth.

•  Investment projects in the region now cover all vehicle types. In the main, the market remains price sensitive, but there is a growing middle class and in some countries a very wealthy minority. This year, Renault plans to start assembly of up to 60k of the Dacia Logan in Russia, whilst DCX, VW and Toyota are targeting the middle and premium markets with new projects. This will present a renewed challenge to local assemblers, many of which may struggle to find a place in this rapidly changing market.

Source: PwC Autofacts

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