OVERVIEW OF CENTRAL AND EASTERN EUROPE CAR MARKETS

Transcription

1 OVERVIEW OF CENTRAL AND EASTERN EUROPE CAR MARKETS MAY 2005 Presentation by Dale Butcher Group Development Director, Inchcape plc

2 OVERVIEW OF CEE AUTOMOTIVE MARKETS 322 ( 000 Units) Estonia Latvia Lithuania 206 Belarus Czech Rep Russia (1) Slovenia 68 Croatia Slovakia BOSNIA- Albania Hungary Former Yugoslavia Romania 17.6 Bulgaria Macedonia Ukraine (1) Moldova 2004 EU Entrants 2007 EU Entrants CIS countries (1) Includes only foreign (non-cis) brands Source: Global Insight; BCG

3 HIGH GROWTH IN CENTRAL AND EASTERN EUROPEAN (CEE) AUTOMOTIVE MARKETS 3 Key drivers Low current levels of penetration of auto ownership Old age of car parc need for replacement Fast rising economies (GNP) and consumer disposable incomes - higher income groups growing disproportionately fast Increased availability of automotive finance products couple with declining interest rates (especially in new EU entrants) For Russia and Ukraine, declining tariff protection in context of WTO negotiations rapid gains of foreign OEMs, against uncompetitive Soviet legacy producers

4 STRONG CORRELATION BETWEEN ECONOMIC GROWTH AND CAR PENETRATION 4 Passenger cars per 1,000 capita 600 Italy Germany 500 Slovenia Spain France UK Belgium 400 Estonia Czech Rep. Portugal Greece Netherlands 300 Lithuania Latvia Croatia Slovakia Hungary 200 Romania Russia 100 Ukraine GDP (PPP) per capita (EUR) Source: EIU

5 OVERVIEW OF CAR SALES IN CEE COUNTRIES Correlation Between Income and New Car Sales 5 New car sales (units per 1000 inhabitants, 2004) New PC and LCV sales per capita Original EU GDP (PPP) per capita (EUR K) 40 New EU entrants EU entrants in 2007 CIS countries Bulgaria Lituania Latvia Ukraine Romania Russia Slovakia Estonia Czech Rep. Croatia Hungary Portugal Greece Slovenia Spain Source: Global Insight, Polk/Marketing Systems, Eurostat; EIU; BCG

6 CEE CAR PARC IS MUCH OLDER THAN WESTERN ONES Up To Half of Cars in CEE Are Over 10 Years Old 6 % of Parc Age comparison of car parcs: UK vs. CEE countries 100% 24% 54% 50% 50% 37% 32% More than 10 50% 23% 31% 20% 32% 5-10 Up to 5 years old 44% 23% 20% 31% 31% 0% United Kingdom Russia Croatia Slovenia Source: Autostat; Eurostat; BCG analysis

7 DISPOSABLE INCOME QUICKLY RISING IN MANY CEE COUNTRIES 7 Yearly personal disposable income CAGR USD per capita 4,500 4, % 3,500 3,000 2,500 2,000 1,500 Bulgaria Russia Romania 22.7% 25.5% 14.8% 1, Ukraine 20.6% Source: Economist Intelligence Unit; BCG analysis

8 8 UPWARD SHIFT IN HOUSEHOLD INCOMES WILL ALLOW MORE FAMILIES TO PURCHASE FOREIGN CARS Example: Russia Household income distribution, 2001 and 2010 % of Russian households = 2010 = % 18% 16% 14% 12% 10% 8% 6% 4% 2% 0% Income zone for purchase of foreign cars: Around 6% of households in x increase Around 18% of households in to to to to to to to to to to to to to to to to 1500 $ per month Source: Goskomstat; BCG analysis

9 GROWTH RATES IN CEE MUCH HIGHER THAN IN WEST 9 New car sales growth (%) Compound Annual Growth Rate (CAGR) Forecasts 18% 16% 14% 12% 10% 12.6% 11.0% 9.6% Sales of foreign (1) brand cars only Sales of all new cars 8% 6% 7.1% 6.1% 5.9% 5.9% 5.6% 4% 2% 0% 3.0% 1.6% 0.9% Western Europe Hungary Slovenia Croatia Bulgaria Czech Rep. Romania Estonia Slovakia Lituania Latvia Ukraine Russia (1) Denotes cars not produced in the CIS Source: Global Insight; BCG

10 ROBUST OUTLOOK FOR CAR SALES IN CEE 10 Expected annual growth CAGR % 16% New cars and light vehicles Russia 14% 12% 10% Ukraine Latvia Lithuania Sales of foreign (1) brands cars only Sales of all new cars 8% Slovakia Romania 6% 4% 2% 0% Estonia Czech Republic Bulgaria Croatia Slovenia Hungary New car sales (K units, 2004) (1) Foreign denotes cars not produced in CIS Source: Global Insight; BCG

11 USED CAR IMPORTS HAVE BEEN IMPORTANT BUT VERY VOLATILE Dependent on changes in government policies 11 Used Car imports (% of first registrations) 60% 40% Ukraine Russia Croatia 20% Slovenia Hungary Slovakia 0% Source: Global Insight; Renaissance Capital; Inchcape; BCG analysis

12 WTO ENTRY WILL SET TRADE FRAMEWORK FOR AUTOMOTIVE INDUSTRY IN RUSSIA AND UKRAINE 12 Russia s entry into WTO expected to lower import tariffs, yet timing is unclear Russia declared commitment to WTO entry, yet exact timing is not clear WTO entry expected in early 2006, but could slip Multiple issues need to be solved before entry WTO entry expected to lower auto tariffs from 35% to 25% and then to 10% in the first five years Proposed component tariffs at 0-5% stimulating investment by foreign producers (e.g. Toyota) Ukraine s upcoming entry into WTO by end-2005 would force import tariffs reduction New Ukrainian government intent on WTO entry by end-2005 As a part of programme to increase cooperation with the West, with a view to eventual EU entry In competition with Russia over which country would be the first to join WTO WTO entry would lower tariffs from current 20% to 10% by 2008 Government committed to this course of action Domestic auto manufacturers lobbying for policy like Russian one WTO entry should lower import tariffs significantly in both countries, increasing penetration of foreign cars, both imported and locally assembled, at expense of domestic industries

13 CEE MODEL SALES PATTERN DIFFERS FROM WEST Cars By Type (Percent of Total Market, 2004) 13 Original EU-15 New EU Entrants Russia SUV-E 1.6% SUV-E 0.4% SUV-E 1.3% SUV-D 1.6% SUV-D 0.5% SUV-D 1.4% SUV-C 2.2% SUV-C 1.1% SUV-C 10.6% SUV-B 0.2% SUV-B SUV-B MVAN 6.1% MVAN 0.4% MVAN MPV-D 2.2% MPV-D 0.6% MPV-D 0.2% MPV-C 8.4% MPV-C 2.9% MPV-C 1.6% MPV-B 2.8% MPV-B 1.8% MPV-B F2 F2 F2 F1 F1 F1 E2 0.5% E2 0.2% E2 0.3% E1 4.0% E1 1.1% E1 0.8% D2 6.7% D2 2.1% D2 1.4% D1 8.1% D1 7.7% D1 7.8% CDV 4.1% CDV 1.9% CDV 0.1% C2 3.4% C2 5.8% C2 2.1% 63.3% C1 18.9% C1 21.1% C1 B 24.2% B 43.3% B 3.6% A 4.9% A 9.1% A 5.4% 0% 10% 20% 30% 40% 50% 0% 10% 20% 30% 40% 50% 0% 10% 20% 30% 40% 50% Note: Original EU-15 includes: Austria, Belgium, Denmark, Finland, France, Germany, Greece, Ireland, Italy, Netherlands, Norway, Portugal, Spain, Sweden, UK New EU 2004 includes: Czech Rep., Estonia, Hungary, Latvia, Lithuania,, Slovakia, Slovenia Source: Global Insight; BCG analysis

14 PREMIUM SEGMENT EXPECTED TO INCREASE WITH GDP GROWTH Premium (1) Segment share 14 20% 18% 16% 14% Latvia Italy Belgium UK Netherlands 12% 10% Lithuania Estonia Portugal Greece Spain 8% 6% 4% 2% Ukraine Bulgaria Romania Russia Czech Rep Slovakia Croatia Hungary Slovenia 0% GDP (PPP)/capita (1) Defined as sales of Audi, BMW, MB, Volvo, Land Rover, Saab, Porsche, Chrysler, Jeep, Jaguar, Lancia, Maseratti, Lamborghini, Lotus, Lincoln, Lexus, Ferrari, Touareg, Phaeton Source: Polk/Marketing Systems, October 2004; Eurostat; BCG analysis

15 CHARACTERISTICS OF DEALERSHIP STRUCTURE ATTRACTIVE FOR INVESTMENT 15 Average dealer size higher than in western Europe New EU entrants: 10% larger on average Russia, Ukraine: 2-3x larger (foreign brands) Combined with low dealership density relative to population, means need for new dealerships Concentration of sales in capitals/major cities Especially for premium brands Foreign brands in CIS Higher levels of profitability than in West Higher scale, lower factor costs (especially labour) yet, additional profit contributors from financial products, service, used cars still underdeveloped

16 DEALER PENETRATION IN NEW EU SIGNIFICANTLY LOWER THAN IN ORIGINAL EU Dealers per million inhabitants Average sales per Dealer (unit) EU-15 New EU Future EU 2007 UK Bulgaria 5 Russia EU-15 New EU 2004 Future EU 2007 UK 41 Bulgaria Russia Note: EU-15 includes: Austria, Belgium, Denmark, Finland, France, Germany, Greece, Ireland, Italy, Netherlands, Norway, Portugal, Spain, Sweden, UK New-EU includes: Czech Rep., Estonia, Hungary, Latvia, Lithuania,, Slovakia, Slovenia Potential EU includes: Bosnia, Bulgaria, Croatia, Macedonia, Romania, Serbia Montenegro Russian data for foreign (non-russian) brands only Source: HWB International; BCG

17 LARGE PERCENTAGE OF SALES ARE FOCUSED IN MAJOR CITIES Examples: Romania and 17 Romania Breakdown of new foreign cars sales (% of total units) Breakdown of new cars sales (% of total units) Rest of Country 60% 40% Bucharest Rest of Country 76% 24% Warsaw Note: Romanian data for foreign (non-romanian) brands only Source: BCG, Accenture

18 SUMMARY 18 Fast growth markets Increasing GDP, consumer incomes higher penetration Replacement of old car parc Substitution of foreign cars for Soviet legacy models Profitable, but underdeveloped dealer networks Need for continued establishment of new dealerships Expansion of service, finance, used car profit streams - best practice professional dealer management High concentration of sales in capital cities Opportunities to develop VIR and City State Retail business - Ends -