Industry Trend Analysis - Autos Investment Round-Up: Russia And Central Asia Outperforming - OCT 2017

BMI View: Russia and the economies of the Commonwealth of Independent States are leading the c harge of investment across the e merging Europe region. Companies are being attracted by the prospects of recovery in these markets while in other parts of e merging Europe investments seem more focused on consolidating SUV production and meeting the demand for more complex new technologies.

Emerging Europe Autos Production Investment
Date Announced Country City/ State/ Region Company Value Brief Description Date Onstream
na = not available. Source: BMI
Apr-17 Poland Wrzesnia Volkswagen na Establishing production of the e-Crafter electric utility vehicle. na
Apr-17 Slovakia Bratislava Volkswagen na Establishing production of the Audi Q8 SUV. 2018
Apr-17 Hungary Gyor Audi na Establishing production of the Audi Q4 CUV. 2019
Apr-17 Kazakhstan Kostanay Saryarka-AutoProm na Began assembly of the Chevrolet Niva from kits. Apr-17
Apr-17 Lithuania Kaunas HELLA USD34.9mn Opening new plant producing sensors, actuators and control modules. Adding 250 new jobs. mid-2018
Apr-17 Russia Primorye Sumotori Techno Holding & Arai Shoji (JV) na Construction of new plant for manufacturing electric vehicles and for second-hand car regeneration. Q218
Apr-17 Russia Kokchetau KAMAZ na Began assembly of new KamaZ-5490 Neo model. Apr-17
Apr-17 Russia undisclosed Avtotor & Hyundai Motor USD50mn Avototor to produce Hyundai-branded commercial vehicles (based on full cycle production including welding and painting). Will produce 16,000 additional vehicles per year. Jan-18
Apr-17 Russia Khaliningrad Avtotor na Began contract assembly of the G80 model for the Genesis brand. Apr-17
Apr-17 Russia Khaliningrad Avtotor & FAW USD169mn Signed agreement for Avtotor to assemble FAW-branded cars beginning with Besturn X80 SUV models. Adding welding and painting stages of production in 2020. Max capacity: 50,000 units per year. 2018
May-17 Czech Republic Koprivnice Tatra na Raising production capacity and upgrading production lines. 2017
May-17 Russia Kokchetau KAMAZ na Adding production of new P6 engines and raising capacity to 30,000 engine units per year. Jun-17
May-17 Russia Khaliningrad Avtotor na Began contract assembly of new Kia Picanto hatchback including welding and painting operations. May-17
May-17 Uzbekistan Jizzakh Groupe PSA & SC Uzavtosanoat USD151mn Construction of new joint venture plant producing Peugeot and Citroen light commercial vehicles. Capacity: 16,000 units/year. 2019
May-17 Russia Zavolzhye Bridgestone USD212mn Inaugurated new tyre manufacturing plant. Capacity: 2mn tyres per year. May-17
May-17 Russia Bashkiria KAMAZ na Began trolleybus production at joint venture plant. May-17
Jun-17 Czech Republic Prelouc Kiekert na Construction of new production hall for automotive components. na
Jun-17 Czech Republic Kvasiny Skoda na Expanding plant to add production of Karoq SUV with expected output for the model to reach 140,000 units. Aug-17
Jun-17 Russia Vladivostok Mazda Sollers na Began production of Mazda CX-5 crossover. Jun-17
Jun-17 Hungary Budapest Shinheung SEC na Acquired local plant with plans to renovate and expand facilities. Will supply battery cells to Samsung SDI. na
Jun-17 Hungary Budapest Yongshin Components na Acquired local plant with plans to renovate and expand facilities. Will supply air conditioning, steering and water pump components. na

In BMI's investment round-up of countries in the emerging Europe region, we have identified 21 new investment projects that were either announced or inaugurated in Q217. Investment values for five of these projects were also made available, representing a total of USD616.9mn, which is a 39.5% y-o-y decline compared to Q216 ( see ' Autos Investment Round-Up: Emerging Europe - Russia And Ukraine Back In Play ' , July 13 2016).

This quarter we have identified three key themes across the region: the outperformance of Russia and the Commonwealth of Independent States (CIS), Volkswagen's multi-brand SUV strategy maturing in Central and Eastern Europe (CEE), and rising technological capabilities of suppliers and manufacturers in CEE.

Companies Going East

The most notable aspect of our investment round-up this quarter is the apparent outperformance of markets in the far east of Europe and in Central Asia, namely Russia and the CIS economies. Of the 21 projects announced, 12 were located in Russia, Kazakhstan or Uzbekistan with at least three of these projects being valued over USD100mn and with projects ranging from passenger cars to commercial vehicles and even electric vehicles. Here, we believe automakers across the spectrum are attempting to bring new or refreshed models to market to be ready to capitalise on a recovery, after low oil prices over 2014-2016 sent these markets into a free fall.

Groupe PSA has been particularly prolific here, having announced its USD151mn joint venture investment into light commercial vehicle (LCV) production in Uzbekistan. This announcement not only places the company in good stead for dominating future growth in the untapped Uzbek LCV market but it also rounds off PSA's broader regional strategy in the area. Indeed, the company's Uzbekistan investment must also be analysed in the context of its earlier investments in plants in Belarus (October 2014) and Kazakhstan (December 2014) as well as its current plant in Russia. With all four plants the company now has a diverse and strong network across the region which will benefit the company as sales start to recover.

Volkswagen's Master SUV Plan

Volkswagen's strategy for bringing a wider range of SUVs and crossovers to the line-ups of each of its brands is further maturing this quarter. Audi's announcements for the Q8 and Q4 to begin production in Slovakia and Hungary and Skoda's commitment to producing the new Karoq SUV at its Kvasiny plant must both be seen in the context of earlier investments like Skoda's investment in building the SEAT Ateca, Audi's introduction of the Q3 SUV to its Hungary facility, and the decision to build Bentley Bentayga body parts in Bratislava. Taken together, these latest investments, therefore, show a maturation of the Volkswagen conglomerate's strategy of producing a wide variety of SUVs for all its brands while using common modular platforms and concentrating SUV production for multiple brands in each plant to find cost savings. Clearly, the success of the Volkswagen Group's broader SUV roll-out strategy is now even more heavily dependent on its CEE operations.

Future Tech Making Its Way Into The CEE Region

Finally, we are also seeing the beginnings of a change in products being produced by CEE suppliers in line with the rise of new technologies. For example, in line with the rise of Advanced Driver Assist Systems (ADAS), sensor demand is rising and Hella's investment into a new sensor and electronics plant in Lithuania reflects how CEE producers are helping to supply this demand. Similarly, with the rise in electric vehicles, demand for battery components is rising, prompting companies like Shinheung SEC to set up production activities in the CEE region.