Still, sales recovery in Romania is expected to be long-drawn-out, thanks to two years of recession resulting in elevated unemployment levels and stymied wage growth in the face of high inflation, according to Romania Autos Report Q3 2012 published by Business Monitor International (BMI). Furthermore, with external credit much less readily available, retail lending in the Romanian economy practically stalled in the wake of the global financial crisis. Consumer spending on big-ticket items therefore remains very cautious as is evident from a massive 13.6% y-o-y decline in new passenger car sales during 2011, according to estimates from ACEA.
During the first nine months of 2012, the domestic passenger car sales registered a total decrease by 30.7% compared to 2011, to 14,208 units, while the imported passenger car sales registered a total decrease by 19.1%, when compared to 2011, to 39,374 units1. Total passenger car sales during this period reached 53,582 units, lower by 22.5% compared to the corresponding period from 2011.
The domestic demand in the Romanian auto market continues to be dominated by Dacia although there is increasing participation from other international brands and growth in the country's used car market. Dacia Logan occupied the leader position in the top of passenger cars sales by model, at the end of September 2012, with a total sales volume of 7,107 units, significantly higher than the second place occupied by Dacia Duster, with a total sales volume of 3,994 units. The following positions are occupied by Skoda Octavia (2,611 units), Renault Clio (1,834 units), Dacia Logan MCV (1,571 units) and Volkswagen Golf (1,438 units).
On the other hand, sales of light commercial vehicles (LCV) (and minibus sales) did not fluctuate significantly during the first nine months of 2012 compared to prior year: sales of domestic LCVs registered a total decrease by 4.4%, to 1,800 units, while the imported LCVs sales registered a total decrease by only 0.4%, to 6,760 units. Total LCV sales during the first nine months of 2012 were 8,560 units, lower by only 1.2% compared to the corresponding period from 2011. The segmentation by type of fuel of sales of new vehicles during the first nine months of 2012 shows a 49.8% - 50.2% split between gasoline and diesel, compared to a 60.2% - 39.8% corresponding split in 2011.
The automotive market continues therefore the decrease started during years 2008-2009. While total sales of new vehicles during 2011 were 106,617 units (passenger cars, LCVs and minibus sales), the estimation for current year sales is only around 92,000 new vehicles, according to APIA. However, based on the trend of actual sales during the first nine months of the year, the actual results may be lower at year end. The main causes for the decrease of the auto market are the late launch of the Program for encouraging the renewal of national auto park (Rabla), but also the reduced buying power and the increased imports of second-hand vehicles during the last years. Although Rabla Program continues to have a positive impact on sales, the program is below market expectations.
For Rabla Program 2012, the Environment Fund Administration allocated a budget of RON 114 million, which allows scrappage of 30,000 vehicles older than 10 years. This translates into sales of only 10,000 new vehicles (for acquisition of a new vehicle can be used maximum 3 vouchers), representing a quarter of the sales made through this program. As in 2010 and 2011, the value of the scrappage premium is RON 3,800, being the nominal value of one voucher. A number of 25,964 vehicles older than 10 years were scrapped through the initial phase of Rabla Program 2012 that started on 5 April 2012, and a number of 8,006 new vehicles were acquired, out of which 3,661 from domestic production. A second phase of Rabla Program 2012 was launched on 8 August 2012, for which the Environment Fund Administration allocated a budget of RON 57 million, allowing the scrappage of additional 15,000 vehicles older than 10 years. Still, total sales of new vehicles during the first nine months of 2012 through this program are significantly lower compared to the same period in 2011.
The national production of new vehicles registered a total decrease by 4.7% (to 239,153 units) up to the end of September 2012 – by 1.4% in passenger cars (to 227,952 units) and by 43.3% (to 11,187 units) in LCVs.
Besides the impact of lower demand from domestic market, the decrease was also determined by the discontinued production of model Ford Transit Connect, which was replaced by the new multi-activity vehicle Ford B-MAX, for which production was officially launched in June 20122. Ford B-MAX is the first car to be built at Craiova and will be manufactured exclusively in the Romanian plant. It is estimated that approximately 60,000 vehicles will be produced until the end of this year.
Also, the production of Logan Pick-up was discontinued in May 2012, after almost 5 years of production of this model. Logan Pick-up was launched in 2007 and during the 5 years of production, Dacia produced a number of 31,341 vehicles, out of which 75% were exported (main markets were France and Turkey). Over 6,700 vehicles were sold in Romania.
In addition, Dacia launched Dacia Lodgy in June 2012 and Dokker (the combi family model Dokker and the utilitary vehicle Dokker VAN) in September 2012, both of which are being produced in Marocoo. As a result, the production of Logan VAN was discontinued at Mioveni at the beginning of August 2012 and it is expected that the production of Logan MCV (break) will also be discontinued towards the end of 2012. Since the launch in 2007 and until August this year at Mioveni were assembled in total over 53,000 units of Logan VAN. Given the expected launch of the new Logan and Sandero models, the production of the current Logan (sedan) is also expected to be discontinued at Mioveni. Thus, Dacia production plant from Romania will remain with only three models instead of six in prior year, while the spare production capacity will be most probably taken over by the Duster model.
Exports of new vehicles during the nine months of 2012 (233,728 units) are higher by 3.9% compared to the same period in 2011. The increase is being driven by the higher export of passenger cars by 8% (223,619 units in 2012 compared with 207,108 units in 2011), while the exports of LCVs were lower by 43.1% (10,109 units in 2012 compared with 17,774 units in 2011). The decrease recorded by LCVs has the same main cause, the discontinuance of production of model Ford Transit Connect. However, it is expected that the new Ford B-MAX will contribute to an increase in the volumes of exports during the last quarter of the year. As the domestic demand continues to be extremely low, the share of the exports in total production increased during 2012, representing 97.7% at the end of September 2012 (89.6% in 2011).
Imports of new vehicles during the first nine months decreased by 19.1% (to 39,374 units) for passenger cars, while it increased by 0.7% (to 6,248 units) for LCVs, compared to the same period in 2011. However, the imports of second-hand vehicles continued to increase significantly during 2012. APIA stated in June 2012 that the imports of second-hand vehicles increased by 66% during the first half of the year, compared with 2011, and that the majority of these second-hand vehicles is more than 10 years old (45% of passenger cars and 60% of commercial vehicles). In Romania, the imports of second-hand vehicles are approximately 2.5 times higher than imports of new vehicles, while the mature markets of Europe show a reverse ratio: 1 second-hand vehicle for each 3 new vehicles.
According to BMI, industry data suggest that Romania boasts a strong integrated supply base with the presence of nearly 500 suppliers, employing around 100,000 staff. Traditionally, the segment has been dominated by electric systems manufacturers, but this is rapidly changing as a host of foreign players such as Michelin to Autoliv have gradually set up production in Romania. However, BMI research shows that much of this investment has been fairly unbalanced, as suppliers are mostly concentrated in the western part of Romania, where numerous industrial parks host vehicle manufacturers. More recently, however, the southern part of the country has emerged as an alternative region on the back of various investments. Another major concern for the parts segment is the low level of orders from carmakers due to slow recovery in auto production, which may delay new investments in the country. BMI believes that Romania offers huge potential for the parts segment. It is strategically placed to serve demand in Western and Eastern Europe and an improved regulatory structure following EU accession has made it an attractive destination for investment.