Automotive industry still has room for growth, but at a slower pace?

The past few decades have witnessed the automotive industry gaining significantly from the globalization opportunity. Having established a footprint across most major markets, companies across the automotive ecosystem are now being challenged by local volatilities ranging from economic uncertainty and political instability to protectionism and trade dynamics, a study shows

2017-04-03 22:07:40 - From the Print Edition

According to EY, the automotive industry is likely to witness more changes in the next decade than it saw in the last 20 years. They have identified six drivers of change that will shape the automotive ecosystem over the next decade: battling to own relationships in a digital marketplace; "digitalization" across the value chain; securing resources for business continuity; diverse sources of unpredictability; unprecedented scrutiny; accelerating pace of disruptive competition, and innovation.
About 70 per cent of all vehicles sold by 2045 are expected to have autonomous capabilities, according to the quoted source.

Digitalization and seamless connectivity overwhelms the automotive industry's data management and process transformation capabilities. Increasing volumes of data and sophistication of connectivity across the value chain are impacting the entire industry ecosystem.
"From exploring the monetizing opportunities at the consumer end of the value chain, to transforming the workplaces by applying robotics, the potential for harnessing the power of digitalization within the auto industry is substantial. Unmanaged, this data threatens to overwhelm the automotive industry's systems and processes. Managed, it can be a major source of competitive edge."

In the past years, the Romanian automotive industry has been very attractive for both existing suppliers who chose to expand their production capacities and newcomers who opened facilities here, according to Bogdan Dimitriu, plant manager - Federal-Mogul Motorparts Ploiesti.
"We at Federal-Mogul Motorparts stand as proof of this trend, as we grew exponentially since 2011 when we entered the local market," Dimitriu told The Diplomat – Bucharest. "In five years, we doubled our production capacity at our brake pads facility in Ploiesti and inaugurated a new wipers plant at the same site."

In his opinion, as production expands companies must employ more personnel to cope with the new realities. "In their quest for skilled professionals as part of their business strategy to have a sustainable development, companies approached the academia. Nowadays, we managed to create solid partnerships with the representatives from various education institutions and meetings are taking places on regular basis. The purpose of these meetings is to have a broader perspective on this industry's necessities to perform."
According to Dimitriu, the industry will continue to grow, but at a slower pace compared to "let's say 2008 until now".

Federal-Mogul's representative stated that the local industry is more competitive now in terms of both operators and labour force needs. "The recruiting process for skilled labour force is more complex and engages more resources which companies have to dedicate. As the market matures, the level of growth, which characterized the previous years will be more difficult to achieve, but I am positive about the evolution of the Romanian automotive industry."
In his opinion, the removal of the environment tax will have the most significant impact on the automotive market. "This measure encourages Romanians to purchase second-hand cars, instead of new ones. Thus, this will increase the demand for used spare parts and decrease the request for new ones."

Furthermore, Dimitriu said that Romania is not a very attractive market for 100 per cent electric cars. "This is because on the one hand, the costs for this type of technology are above Romanians purchase power and on the other hand, we lack the appropriate infrastructure to use these cars."
However, he said that hybrid segment is increasing on the local market. Asked about what kind of measures should be taken by authorities to encourage the market growth, Dimitriu told The Diplomat: "We align to the general recommendations coming from the business community asking for more fiscal and legislative predictability, which are mandatory prerogatives in the shaping of our business strategy for the following years. At the same time, we salute the recent initiative coming from the government that supports relocation - the ′first rent′ programme."

Federal-Mogul's representative underlined that the main challenge comes from the increasing competition for skilled professionals. "However, in addition to the adjustments we made in the recruiting process, we have established a long-term partnership with various education institutions both from Ploiesti and Bucharest with the aim of having direct access to students and young graduates interested to work in our industry. Ever since opening the first production facility, we have constantly developed and integrated new strategies to secure our clients' satisfaction with our products. Thus, we will focus on activities and projects for continuous improvement."
According to Dimitriu, Federal-Mogul will continue the ambitious recruiting process already in place since 2015. As such, by the end of 2017 the company will have approximately 800 employees at its two facilities in Ploiesti and the shared services centre in Bucharest.

Ford to create more jobs at Romanian plant in Craiova, Government says

The number of jobs at the Ford factory from Craiova might grow, given that employers might receive some financing from the state, worth 250 Euro for every person hired as apprentice and 300 Euro for every intern, with the condition of issuing appropriate certificates of apprenticeships and internships, according to the Labour and Social Justice Ministry.

Minister Lia Olguta Vasilescu, had a meeting with a delegation of Ford Romania to discuss the possibility of increasing the number of workplaces at Ford′s factory in Craiova. The Ministry is working on draft bills for securing EU financing to convince more companies to accept apprentices and interns. "The measures focus on unemployment reduction and workforce qualification, but also on the stimulation of the employers, and these measures were appreciated by the representatives of the American company," said the Labour Ministry. Ford invested over one billion Euro since 2008 until now in Craiova, in its vehicles and engines production.

The American car producer has planned 130 million Euro in additional investments at the Craiova plant, where it will produce a new car model, and the Public Finance Ministry (MFP) will extend the production period target until 2025, according to a release of the Ministry.
"The Public Finance Ministry proposes a new change in legislation through which a state aid of 75 million Euro will be given to the Ford Romania company for the implementation and finalization of the investments projects in the cars and engines plant from Craiova, valued at 869 million Euro. This consists of a prolonged period of production until December 31 2025," says the MFP.

The condition is that Ford make at Craiova an additional investment of at least 130 million Euro until 2019, from its own resources only, without state aid. Out of this amount, 100 million Euro will be used for the production start of a new car model at Craiova and 30 million Euro to produce engines.
If Ford does not meet the terms of the deal in this period, a new recovery mechanism of the state aid will be determined, which will be paid by Ford proportionally with the non-fulfilment level.
"The Romanian state will only monitor the investment maintenance and the fulfilment of the conditions associated with this until December 31 2017, including Ford meeting the production target of 81,000 cars and 1.5 million engines."

Gestamp to enter Romanian market

Gestamp, a Spanish multinational company specialised in the design, development and manufacturing of components for the automotive industry, has announced its entry into Romania, through the acquisition of a majority stake in a Romanian Company, owner of a plant which has the Renault-Nissan Group as its main customer via its subsidiary, Dacia.

The company is located on the outskirts of Pitesti, the main centre of the automotive industry in the country. It has over 200 employees and invoiced 17 million Euro in 2016. Gestamp has carried out the acquisition through its Turkish subsidiary, Beycelik Gestamp.

The Romanian plant currently supplies small and medium-sized stamped components, as well as assemblies. Gestamp aims to increase turnover at the facility by manufacturing more added-value components. This acquisition will enable Gestamp to accompany its global customers, the Renault-Nissan Group and Ford, which have operated in Romania for several years.
With Romania, Gestamp adds another country to its production perimeter. The company now operates in 21 countries and eight out of every ten vehicles produced in the world each year are manufactured in the markets in which Gestamp has production plants.

In the world ranking, Romania is the 27th country in vehicle manufacturing, producing 387,000 vehicles per year, of the Dacia and Ford brands, both of which have plants in the country.
In this respect, the chairman and CEO of Gestamp, Francisco Riberas, stated: "Romania is a country with a very promising present and future in the automobile sector and we are very pleased to be able to offer our customers based in the country the skills with which they are already familiar in other parts of the world".

This acquisition serves to strengthen the strategic relationship with Gestamp's global customers, Renault and Ford, with which the group shares numerous projects in different parts of the world.
Gestamp is the main supplier of stamped components to the Renault group and the second supplier of the Renault-Nissan Group. The new plant allows Gestamp to increase its presence close to the factories of the French group. It will also enable the Company to provide its services to Ford, with which Gestamp operates on various continents.

Continental to expand Timisoara plant following 12 million Euro investment

German car parts maker Continental announced that it will again expand the electronics items factory from Timisoara that produced 60 million finished electronics items in ten years. The investment is worth 12 million Euro and represents the third expansion of the work factory space.
"The surface will increase this year by 7,000 sqm and at the end of the works the production unit from Timisoara will have a surface of over 21,000 sqm," according to Continental.
In the Continental factory from Timisoara, two million components enter daily on the production line and 45,000 finished products are manufactured daily.

Also, the Germans began recruiting for their fuel pump factory in Brasov and 180 workers were invited for an interview, to be hired in March and April, according to profit.ro. The factory was opened in 2011 when 1,400 workers were recruited. Continental Brasov can produce in Romania over ten million units annually, at full capacity.

German group Continental is one of the largest international suppliers of auto parts and tires, with a turnover last year of around 40 billion Euro and 220,000 employees in more than 56 countries.
Continental has invested around 1.1 billion Euro in Romania from 1999 to 2015. The company owns seven production units and four R&D centres in Timisoara, Sibiu, Carei, Nadab, Brasov and Iasi. Continental is partner of a joint-venture in Slatina and has a tire distribution centre in Bucharest.

Chinese firm to open car parts plant in Brasov

The company Ningbo HuaXiang Electronic Co Ltd from China, which is active in the cars components field, will invest 30 million dollars in Brasov, in a new production hall which will manufacture spare parts and accessories for German Mercedes cars. The investment's beneficiary is the German-Romanian company Hib Rolem Trim and the project will start in the first quarter of 2017 and will be finished by the first half of 2019, news.ro reports, according to Business Review.
The two companies signed on Friday a memorandum of understanding in Bucharest for starting this project which will have 15,000 square meters and will create 265 new jobs.
"Within the new investment, we will produce spare parts and accessories for the cars industry, comprising decorating products for the car's interior such as dashboard decorations, the central carriers and doors decorations for the car producer Daimler (Mercedes), A and B classes," said the investor, according to news.ro.

The products will be found in the cars sold in Europe. Hib Rolem Trim already has a plant in the Brasov area. Also, one year ago, the two companies signed an intention letter for the investment development. The investment valued at 10 million Euro, implying the transfer of a production line for interior decorations for BMW, was already made. It is forecast to be finished in December.

Germany′s Draxlmaier is looking for 110 workers for their car parts factory in Hunedoara

German automotive manufacturer Draxlmaier, which has 15,000 employees in local factories, is looking for another 110 workers for the factory in Hunedoara, according to the website of the County Agency for Employment Hunedoara, Ziarul Financiar reads.

Draxlmaier Hunedoara′s activity is the production of electrical wiring, thermoplastic elastomer parts and assembling electrical components. DAR Draxlmaier Automotive (headquartered in Timisoara with a branch in Hunedoara) registered in 2015 a turnover of 147.9 million RON (over 33 million Euro), net profit of 6.3 million RON (1.4 million Euro), with an average number of 2,471 employees, according to the website of the Ministry of Finance. Draxlmaier announced last year that it plans to expand production at factories in Hunedoara, Brasov and Pitesti. The company has productions units in Brasov, Hunedoara, Pitesti, Satu Mare and Timisoara.

Yazaki got state aid to extend production in Braila factory

Japan's car part manufacturer Yazaki, which had five plants and over 6,800 employees at mid-2015 in Romania, received 15 million RON (3.3 million Euro) in state aid to extend production at its manufacturing centre in Braila, its latest facility in Romania, according to Ziarul Financiar.
The financing agreement was approved on December 21, and the Japanese group was committed to creating 830 jobs. Total investment in Braila factory is around 19 million RON (4.2 million Euro), public documents show.

Yazaki began production at Braila in October 2015 and at the end of June last year the manufacturer had 1,344 employees and "plans to grow further," according to information previously provided by company representatives. This was Yazaki's second attempt to get state aid for the plant in Braila.
The Japanese had a similar request in 2014 for a state aid worth 21.6 million RON (4.8 million Euro) and even though the request was denied they continued their investment plan.

Faurecia to open a new plant in Romania

French company Faurecia, one of the largest auto parts suppliers in the world, will open a new factory in Romania at Cateasca (Arges County), where there was already a unit opened last year. 500 workers were hired at the first factory in Cateasca. Faurecia, partially owned by Peugeot Citroen group, is one of the largest suppliers of automotive seating and interiors in the world.
Since 2003, Faurecia is present in Romania with plants in Talmaciu (automotive seating division), Craiova (emission control technologies), Pitesti (interior systems) and Ramnicu Valcea (fabric seat upholstery and leather). The new factory, a 12 million Euro investment, became the company's fourth in Romania.

Faurecia Automotive Seating manufactures products for Peugeot and Audi in Romania, especially for the A4 model. In 2015, the group recorded total sales of 20.7 billion Euro and a number of 103,000 employees in 34 countries, 330 factories and 30 research and development centres.
Faurecia is now recruiting more than 150 people for its factory opened in May 2016 in Budesti, near Ramnicu Valcea. The French officially started production in Valcea in May last year, and in September, the plant already had 1,200 employees.
With a total surface of 12,000 square meters, the plant produces textile and leather covers for some of the world's largest automakers, including Peugeot, Renault, and other Volkswagen brands.

Logistics and industrial space deliveries to hit post crisis high in 2017, says Colliers

Some 500,000 sqm of logistics and industrial space are forecast to be delivered this year in Romania which will mark the highest post-crisis level, according to real estate consultancy Colliers International. About 80 percent of this will be delivered in Bucharest alone, but there is growing interest for regional cities as well.

New developments are fuelled by demand coming mostly from FMCG companies and online retailers which is estimated to remain strong throughout 2017. Online retail is forecast to become the main growth engine for this real estate segment over the next five years which in turn will lead to doubling the existing stock, according to Laurentiu Duica, associate director - industrial division within Colliers International.

"Given the last three years' high demand, we estimate that the current logistics and industrial space stock of three million sqm will increase by 500,000 sqm in 2017 (about 17 percent), marking the highest level of post-crisis deliveries. About 40 percent of the new deliveries will come from FMCG companies, 20 percent from online retailers and ten percent from IT and electronic warehouses," said Duica. There will also be numerous speculative projects which will be delivered this year which should quickly secure tenants, he added.

This year could also see the entry of new players from the manufacturing sector, considering that in 2016 several were looking at the Balkans region and also due to the structural changes of the local economy, added Colliers International representatives. Not only is Bucharest targeted by such potential newcomers but also secondary and tertiary cities with a well-developed retail scene which also benefit from infrastructure developments.

The vacancy rate for industrial and logistics space in Bucharest dropped to two percent in 2016 from five percent the previous year and remained around five percent for the rest of the country, according to Colliers International. Last year's new stock of industrial and logistics space stood at approximately 350,000 sqm.