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Romanian Auto Parts Market

Corina Gheorghisor From U.S. Embassy Romania| April 17,2007

An increasing number of foreign companies are making the strategic decision to manufacture auto parts for Romanian cars. This reflects the latest trend in the automotive industry whose growth has shifted from mature markets to emerging markets. Original equipment manufacturers (OEMs) and suppliers are increasingly shifting production to Eastern Europe.

The attraction of foreign suppliers to Romania is closely linked to the advantages the country has to offer. Romania has a large domestic market (almost 20 million consumers), and as such is considered the second largest market in Central Europe. It is geographically located at the crossroads of traditional commercial routes, at the intersection of three prospective European transportation corridors. Its ideal location makes it possible to offer competitive prices for goods transiting between the Caspian Sea, the Black Sea and Western Europe.

The domestic and international airports in Bucharest, Constanta, Timisoara, Arad, Suceava, and Sibiu are also a plus. Romania has a developed industrial infrastructure, and wide resources including electricity, oil and petrochemicals. Another advantage comes in the form of its skilled, relatively low priced labor force known to be well trained, particularly in technology and engineering.

The presence of branch offices of numerous international banks (Citibank, ABN-AMRO, ING Bank, Creditanstalt, Raiffeisen) also offers a guarantee for the streamlining of the financial transactions. Romania will join EU in 2007 and is already a member of the UN and of numerous international organizations (associate member in EU, CEFTA, BSEC, etc.).

Compliance with the Single Market rules should lead to the following developments within the Romanian automotive sector:

  •    Increase in salary and improved working conditions

  •    Enforcement of EU environmental protection regulations, resulting in an increase in costs

  •    Increase in the acquisition of second hand vehicles (also attributable to weak purchasing power)

Romanian Automotive Industry – Current Status and Perspectives

The significant changes in the automotive industry were brought about thanks to the privatizations, coupled with the relocation to Romania of several multinationals in the automotive sector.  The privatizations led to a streamlining of activities. Currently, the Romanian auto parts companies are suppliers for both the European Union and non-EU countries.

From 2001 through 2004 the structural changes in the industry consisted of the modernization of the existing enterprises with a competitive edge as well as the conversion of those who were not making a profit. Under these circumstances, industrial output increased by 25% during 2001-2004 in comparison to 2000, which represented an annual average increase of 5.8%. @@page@@

 

Three companies are producing passenger cars and commercial vehicles in Romania: S.C. Automobile Dacia Group Renault S.A. in Pitesti, SC Daewoo Automobile Romania SA in Craiova, and Roman Brasov, the truck manufacturer. (The S.C. Aro Campulung plant underwent a failed privatization attempt by U.S.based Crosslander and halted production in late 2005).

Prior to 1990, automobile production was almost 100% domestic, with a significant number of local suppliers producing all the parts and components for the locally manufactured vehicles.

In Romania, the current car manufacturing industry consists of more than 250 companies, manufacturers of auto parts, sub-assemblies and components, the majority of which are SMEs. These firms have evolved as a result of the sector’s restructuring process, privatizations through foreign companies, relocation from abroad of specific manufacturing units or through green-field investments.

The main activity of these auto parts manufacturers is related to the production of metallic, plastic and rubber components, in addition to manufacturing electrical and electronic components. In most cases production is based on contract manufacturing.

Market Trends

Since 1991, significant changes have taken place in the automotive manufacturing sector while new trends continue to emerge. For example, in 1991 there were only 39 production units, a number that increased to 376 in 2002, representing an eight-fold increase against 1991. That number grew to 424 by 2004.

Substantial layoffs were a necessary step to the detriment of the labor force employed by the sector. The modernization of the sector, as a result of the implementation of updated technologies, obviously required fewer employees.

As a result, in 1991 the work force employed by the automotive manufacturing sector was 125,000, by 2002 that number had dropped to 83,297, representing a decline of some 33% decrease. By 2004, thanks to an increase in the number of firms in the sector, the labor force increased slightly to 84,793.

The turnover in USD million doubled over a two-year span (2002-2004), from 1,243.61 to 2,466.42. This increase also reflects greater efficiency in the sector based on the implementation of modern automated technologies.

The future of Romania’s automotive parts industry looks bright thanks to the growth of both the domestic and foreign markets. The investments made by the multinational companies, as integrators of products, have fostered legitimate competition at the national level, while orienting the sector towards the concept of competition. A new trend has emerged with the creation of so-called “clusters companies” in which the presence of a manufacturer attracts suppliers who manufacture to specifications; as was the case with Dacia-Renault. Additionally there is an increasing tendency to include Romanian companies in the network of multinational suppliers. @@page@@

 

Romanian auto parts manufacturers have resorted to international outsourcing and subcontracting practices. Beginning in 1999, when Dacia Automobile was purchased by Renault, the Pitesti facility has consistently expanded its outsourcing and subcontracting practices worldwide, while national suppliers continue to play an important role.

The manufacture of Renault’s wildly successful model, the Logan, is such an example. 21 Romanian suppliers and 21 foreign suppliers are currently utilized to manufacture parts for the Dacia-Renault Logan car. To date the firm has reportedly invested USD 133 million in Romania.

Of the 47 foreign automotive companies who currently have a presence in Romania, 14 are located in the Dacia Pitesti Industrial Park, some 60 miles north of the capital city of Bucharest. The Romanian suppliers are not 100% local companies; rather they are comprised of joint venture partners, in which the Romanians provide the production facilities, utilities and engineering services, while the name players from the international car manufacturing industry bring their know-how and raw materials to the table. These JVs manufacture products for both the domestic market (predominantly for Renault-Dacia) and the overseas markets.

The German firm Continental invested USD 133 million to build its own facilities for the production of tires. Continental chose the city of Timisoara where they already had an existing facility for the production of transmission belts, representing a USD 7.26 million investment. The tire manufacturing facility was built from the ground, employing 800 employees who currently produce 9.2 million tires annually. The rationale behind the Germans’ selection of Timisoara is multifold: the competitive cost labor force, a highly qualified and English speaking workforce, who are willing to work flexible shifts.

In addition to Continental, there are other tire manufacturers in Romania, including the French Michelin and the Italian Pirelli. Michelin took over the Tofan Group, Silvania Zalau and Victoria Floresti facilities to the tune of a USD 80 million investment.

The French manufacturers from Renault have also attracted Chassis, Valeo, EuroAPS, and Johnson Controls, although it would have been possible to manufacture in Romania the aluminum cast pieces for the board and seats.

The manufacturers coming to Romania to produce components are from the U.S., Japan or Europe. Competitive labor costs attract these firms who are looking to develop operations based on contract manufacturing. The contract-manufacturing concept involves assembly contracts, backed by large foreign companies providing the financing, engineering and know how while the local firms provide physical space, utilities and labor. 

In 2003 DCI Walbridge Partners Company, part of Detroit-based Walbridge Group purchased the local firm Mefin Sinaia, a company specializing in the production of injection equipment for diesel engines, cast and alloyed parts, equipment and instruments, for USD 1.3 million.

Broadhurst Investment Fund, a U.S. investment fund managed by New Century Holdings, controls 90% of Imsat, a Bucharest-based facility in which they invested USD 200 million. Imsat Romania is an automation company, which has been manufacturing at one of the French Renault facilities since 2004, after having worked with Dacia Pitesti for several years.

Rombat Bistrita produced 3,000 batteries for Dacia Logan, and currently exports 6.5-7% of its production to Russia, Ukraine, Hungary, Moldova and Finland. In order to meet the demand for spare parts and components for Renault some 21 French companies have invested USD 119 million to date in the Romanian market. Several other Western European groups have also been created with investments estimated between USD 475-600 million.

The skill of the Romanian labor force coupled with the allure of the potential of Romanian developing into a significant regional market has attracted the attention of both the American company Dura Automotive Systems and the Japanese firm Fujikura.

Dura Automotive chose to build its auto parts manufacturing unit in the city of Timisoara, which they build from the ground floor. Dura Automotive has three other facilities located in the Czech Republic and Slovakia. American-based Solectron is also based in Timisoara. Solectron’s production is closely related to the automotive sector, based on its electronic populated boards components. @@page@@

 

The Japanese company Fujikura merged with U.S. Alcoa, resulting in the creation of Alcoa Fujikura Romania. The firm has invested in two facilities located in Chisinau-Cris and Caransebes with an estimated investment of USD 4 million. The company produces wiring assembly units for automotive distribution systems.

Most of the investments in auto parts firms began from ground zero and are geographically located the Timisoara region, as in the case of the Japanese company Sumitomo Electric Wiring System. SEWS, has a subsidiary in Deva which manufactures electric wire for Renault, one in Orastie for manufacturing electric wire for Honda and a third in Alba Iulia which produces electric wire for Toyota.   Profits in 2005 were on the order of approximately USD 89 million, representing a 30% increase in comparison to 2004. In 2006 the manufacturer announced plans to develop a partnership with the international group Citroen-Peugeot after witnessing the growth of its electric wiring production for some of the world’s leading carmakers including Honda, Renault-Nissan, Toyota, Ford-Mazda.

Foreign auto parts producers

Operational:

1. Autoliv Inc (Sweden) – safety belts- Brasov and Pitesti (green field)
2. Auto Chassis Int’l ACI (France) – car decks - Pitesti (green field)
3. Alcoa Fujikura Inc. (USA) – electric wiring -  Chisineu-Cris (Bihor) and Caransebes (green field)
4. ACE (Spain) – electric wiring in Cluj Napoca (green field)
5. Baumeister&Ouster (Germany) – plastic and aluminum auto parts in Arad (green field)
6. Continental Automotive Products (Germany) – wheels in Timisoara (brown field)
7. Continental Automotive Systems (Germany) – electronic systems in Sibiu (green field)
8. ContiTech (Germany) – transmission belts and rubber hoses in Timisoara (green field)
9. Coindu (Portugal) – seat covers at Curtici Arad (green field)
10. DaimlerChrysler (Germany/USA) – gearboxes and metallic components at Cugir (joint venture)
11. DelphiPackard (USA) – electric wiring at Sannicolau Timis ((green field)
12. Dura Automotive (USA) – control systems in Timisoara (green field)
13. Eybl International AG (Austria) – steering wheels and seat covers in Timisoara (green field)
14. Faurecia (France) – seat covers in Talmaciu, Sibiu (green field)
15. INA Scheaffer (Germany) – bearings in Brasov (green field)
16. Johnson Controls (USA) – seats and seat covers in Ploiesti and Pitesti (green field)
17. Honeywell Garett (USA) – auto parts and turbo blowers in Bucharest (brown field)
18. Kromberg&Schubert (Germany) – electric wiring in Timisoara (green field)
19. Koyo Seiko (Japan) – bearings at Alexandria (privatization)
20. Lisa Draxlmaier (Germany) – electric wiring and systems at Pitesti (brown field), Satu-Mare, Timisoara and Brasov (green field)
21. Lear Corporation Romania (USA) – electric wiring in Pitesti (green field)
22. Leoni Wiring Systems (Germany) – electric wiring in Arad and Bistrita (green field)
23. Michelin (France) - tires at Floresti (Prahova) and Zalau (stock take over)
24. Magneto Group (Italy) – wheels at Dragasani Olt (privatization)
25. Momo (Italy) – steering wheels at Brad Hunedoara (green field)
26. Pirelli/Continental AG (Italy/Germany) – metallic cord in Slatina (green field)
27. Phoenix AG (Germany) – rubber components at Satu-Mare (green field)
28. SNR Roulemets (France) at Sibiu (green field)
29. Solvay-INERGY (Belgium) – auto parts at Pitesti (brown field)
30. Siemens Automotive (Germany) –automotive dedicated software in Timisoara (green field)
31. Sumitomo Electric Wiring Systems (Japan) – electric wiring – Orastie, Deva and Alba-Iulia (green field)
32. Takata Corporation (Japan) – airbags and steering wheels – Arad and Sibiu (green field)
33. ThyssenKrupp (Germay) – springs and pistons – Sibiu (joint venture)
34. Valeo (France) – wiring – Pitesti (green field)
35. Yazaki Corporation (Japan) – electric wiring and systems – Ploiesti and Arad (green field)

Under construction

1. Coficab (Tunisia) – electric wiring – Arad – (green field)
2. Hella (Germany) – lamps – Timisoara (green field)
3. Pirelli (Italy) – wheels- Slatina (green field)
4. Renault-Nissan – gearboxes – Pitesti (green field)
5. Schlemmer (Germany) – wiring protection systems- Satu-Mare
6. TRW (USA) – steering wheels – Timisoara (green field) @@page@@

 

Auto Parts Exports Doubled in 2004

The export of auto parts from Romania doubled in the first half of 2004, reaching an estimated USD 519 million. That rapid rate of growth, i.e. 106% in the first quarter of the  year, continued at about that same pace throughout the remainder of the year.

The export activity of the sector as a whole can be characterized as “explosive” these past few years, increasing from USD 107 million in 1998 to over USD 715 million in 2005, significant especially when taken into consideration that some of the investments have not yet realized their optimum production cycles.

Dacia’s factories, and others that are also on a similar upward trend in terms of production capacity, guarantee sustained domestic demand, despite the fact that growth has been somewhat stagnate and perhaps is even showing a modest downward trend evident during the past few years. Romania’s domestic market rose from a modest USD 525 million in 2000-2001 to USD 650 million in 2003 thanks to the “roll out” of Dacia’s new models coupled with the excellent performance by Daewoo. Imports have consistently grown from 20% in 1997-1999 to 39% in 2003. The rapid rise in the number of foreign cars registered in Romania has brought about a parallel rise in the number of spare parts imports.

Those firms specializing in the distribution and import of auto parts have benefited from the development of the auto component market, with Augsburg Int’l from Bucharest being the most visible in this regard. ISO 9001 and ISO 9001 international quality standards back Augsburg’s products. They also carry the prestigious labels of brand leaders in the auto parts industry.

Main Investors in the Automotive Industry

Number
Company
Value of Investment
      USD
Year Investment Began
1.
Renault-Dacia
298,030,488
1999
2.
INA Schaeffler
214,581,952
2004
3.
Saint-Gobain
166,917,014
2004
4.
Ruwel AG (circuit boards)
95,381,151
Planned
5.
Auto Chassis Int’l
81,081,355
2002
6.
Yazaki
59,659,836
2004
7.
Pirelli (Cord Romania SRL-JV with Continental
47,727,869
Planned
8
Thyssen Krupp
46,516,053
1996
9.
Continental AG
35,783,826
2002
10.
Leoni Wiring Systems
35,783,826
1999
11
Lisa Draxlmaier
35,783,826
1994
12
Coficab (auto components)
29,817,971
Planned
13.
Coindu (leather and synthetic covers)
29,817,971
Planned
14.
BOS Automotive
23,854,377
2003
15.
Sumitomo Electric Ltd.
17,890,556
2000
16.
Faurecia (part of Peugeot)
13,119,741
2004
17.
Delphi Packard (US)
11,927,038
1997
18.
Eybl Int’l AG
11,927,038
1999
19.
Johnson Controls (US)
11,927,038
2004
20.
Magneto Wheels
11,927,038
2000
21.
Dura Automotive Systems (US)
10,733,587
Planned
22.
Brandl GmbH
8,348,345
2001
23.
Honeywell Garrett (US)
6,558,883
1998
24.
Takata Petri
5,962,621
1997
25.
TRW Automotive
5,962,621
2004
26.
Kromberg & Schubert
4,174,327
2001
27.
Autoliv
3,577,994
1997
28.
Valeo
2,385,066
2002

Three or four investors have reportedly surpassed the USD 119 million benchmark including: Michelin, Continental, Lisa Draxlmaier and, most recently, Germany’s INA Schaeffler. There are a dozen additional investors with over USD 12 million invested, slated to be joined shortly by others in addition to a slightly higher number of smaller local investors.

The majority of these foreign companies has selected the western region of the country (Timisoara, Sibiu, Cluj, but also smaller cities) as their preferred geographic location, or alternatively has chosen to be located near the Dacia factories in Pitesti. Exceptions include the Ploiesti Industrial Park and several locations in Oltenia (Slatina, Dragasani). This geographic distribution is mirrored in other industrial sectors, which can be taken as a sign of an inconsistent national business climate.

In 2004, the net imports of cars and other vehicles exceeded exports by some USD 778 million. The deficit increased to USD 1,058 million in the first three quarters of 2004. Imports of automobiles increased by 91% compared to the same period last year, to USD 1.5 billion, while exports increased by a mere 45%. 2004 exports of auto parts amounted to USD 379 million, only USD 125 million more than imports. In other words, Romania registered a USD 0.77 billion surplus last year in terms of automobile trade, and a surplus of only USD 0.12 billion for parts.

The Germans dominate the geographic origin of investors and it is natural that the destination of exports of auto parts is predominantly to that country. Almost 68% of exports were destined for Germany followed by Austria, Italy and France. While the ratio of French investors is increasing along with Renault’s development plans, they are mostly focused on the domestic market, namely the Dacia factories, and then ultimately on exports, but only in the event a Dacia-dedicated investment is not feasible. The majority of imports originate in Germany (some 30 percent), reflecting the structure of the automotive park and possibly also the practice of contract manufacturing. Korean imports, led by Daewoo, enjoy a 13 percent market share.

In 2001 Michelin took over two tire factories in Zalau and Floresti from the Tofan Group, including re-treading activities, for an amount estimated by analysts as exceeding USD 119 million. Continental, another major tire producer, chose to invest USD 167 million in its own production capacity in Timisoara and Sibiu.

Another major tire manufacturer, Pirelli, is slated to open a steel cord (tire reinforcement) factory in Slatina, with Continental as minority partner. To date, Pirelli (who also owns Telecom Italia) recently began producing cables for the electronic and telecom industry.

Lisa Draxlmaier has invested in several manufacturers located in Brasov, Timisoara, Pitesti, Satu Mare and Hunedoara, to the tune of USD 143 million since 1994. The German company produces mostly electronic components (wiring). With the exception of the tire manufacturers, Draxlmaier remains the most important investor in this sector. The firm, headquartered in Bavaria, is not a typical multinational, rather is considered a well-developed mid-sized company, which has been successful at achieving both flexibility and specialization in a well-defined segment. In 2004, Draxlmaier inaugurated a new cable production facility in Hunedoara worth USD 8 million. The new production unit will supply wiring for the Mini cars produced by BMW and will initially create some 600 jobs, slated to increase to 1,000 by the end of the year. This is the fifth production unit, which the German company has established in Romania, following those in Brasov, Timisoara, Pitesti and Satu Mare. The total value of the firm’s investment to date surpasses USD 143 million. According to official statistics, Draxlmaier Romania is ranked first among Romania’s top exporters to Germany.

Ina Schaeffler (whose full name is INA Walzlager Schaeffler KG), also from Germany, shares the same business model in terms of being recognized as well developed, mid-sized, privately held company with sales estimated at approximately USD 8 billion. The firm’s decision to invest in the Brasov region was reportedly also influenced by the low cost work force, the strong infrastructure coupled with the presence of competitive suppliers in the region. The increasing appearance of more car manufacturing facilities in Eastern Europe will inevitably lead to continued development in the region. @@page@@

 

 Another German multinational company from Nurenberg, Leoni Wiring Systems, is approaching a USD 119 million investment threshold in Romania. The two units in Arad and Bistrita Nasaud, both producers of electric cabling, were slated to upgrade their investments up to USD 66 million in 2004 and USD 36 million in 2005. The firm’s annual sales projections were estimated at USD 33 million but recently had to be updated to reflect the real annual sales figure achieved which were in actuality were almost double the estimate at USD 60 million.

The German auto sub-assembly producer, Schlemmer, will open a new plant for producing protection cables for the automotive industry, through its Satu Mare production unit. The new company, Schlemmer Romanian SRL, will invest USD 12 million and provide at estimated 80 new jobs with production to start up in early 2006. In addition to offering competitive operational costs, Schlemmer will benefit from logistical advantages, namely the ability to provide real time delivery to auto producers both in Romania and in neighboring countries. Schlemmer GmbH is one of the principal producers and worldwide distributors of cable protection systems, air and fluid and mechatronic system solutions for clients active in the automobile industry. The firms also distributor cable systems in the industry and offer wholesale trade. Schlemmer has production units in Italy, Spain, Turkey, Morocco, Tunisia, China, South Korea, Brazil as well as distribution network in 26 countries.

The SWOT Analysis of Romania’s auto parts industry

Strengths: A technically qualified labor force with potential for assimilation and adjustment, availability of domestic raw materials, the ability to manufacture components for car manufacturers, opportunities for green-field investments, the existence of production units located in geographical proximity to infrastructure networks, a large domestic market with a growing absorption capacity, an institutional and legal framework necessary for the implementation of the European Union directives and ECE-ONU regulations.

Weaknesses: Need to update general engineering skills, technologies in operation are those utilized in the ‘80’s; obsolete traditional production systems; inefficient management of human, material and energy resources; counter productive approach to the Quality – Cost – Delivery system; difficulty in accessing training courses resulting in limited professional development of the labor force’s professional capacities; the introduction of the quality and environment management system at a slow pace, which results in insufficient quality performance, environmental protection and the implementation of clean technologies; absence of any viable mechanisms for used cars  recovery/recycling, while industrial services are still operating at minimal levels, innovative methodology implementation is still in the early stages.

Opportunities: The general trend of the market towards assimilation, the tendency of the multinationals to focus on new, emerging markets and the relocation of the auto parts manufacture operation to alternative countries offering more developed sectors, the setting up of the mechanisms for a competitive environment through the support and promotion inherently offered through the application of standards such as ISO 9000:2000 and ISO TS 16949 and ISO 14000 related to the environment management systems; promotion of the innovation as a competitive factor through various programs.

Threats are linked to the sector’s ability to put together an adequate network of suppliers for auto parts integrators and the manufacturers of finite products. They depend, to a large extent, on the capacity of the auto parts producers to adapt to the efficiency, quality and consumption requirements dictated by the integrators acting as the liaison between supplier and end user. The introduction of standards related to environmental protection and the reduction of raw materials and electricity consumption represent real challenges. The reduction and or elimination of major industrial complexes whose operations pollute the environment while using large amounts of electricity should also be taken into consideration. Reduction in budget allocated to research and development has resulted in the country’s inability to sustain or encourage innovation within the sector. When it comes to research, Romania has basically has no strategy in place.

Future prospects

An overview of Romanian foreign trade in the automotive area shows massive imports of cars, as well as increased exports of auto parts. Exports include cabling, steering wheels, car upholstery, connectors, tire cords, and generally any part that involves a significant amount of labor, or anything that is unprofitable to manufacture in more developed countries.

There are some exceptions, such as the Siemens Group in Timisoara, which produces automotive software. According to data from the Association of Producers and Importers of Automobiles (APIA), 30 percent more automobiles were sold in the first nine months of 2005 than the year before, while imports have increased by 33 percent.
The wild success of Dacia’s new Logan model has provided no small measure of hope, as has the increased activity of component producers (some of whose engines are just now revving up). Renault’s hope for its new model is coupled with the formation of new production and assembly centers in other developing countries, such as Russia and Iran. Record sales anticipated in the coming years by the French producers will be counted as exports to these countries.

Renault Romania recently announced they will investment some USD 256 million to build a gearbox facility in Pitesti. The production site will manufacture 2,000 units per day in 2008, which would translate to USD 2.4 billion in revenue for Renault Romania. Everything produced in the new Renault facility will be exported to France, Japan, Mexico, Turkey, the U.K. and South Korea. The French carmaker anticipates that the facility in Pitesti will reach sales in amount of USD 143 million in its first year of operation in 2008. @@page@@

 

Ford Europe, Volkswagen and Audi reportedly are contemplating the possibility of securing partnerships with Romanian companies. It is believed that the success of the Logan car is motivating them to take a close look at the Romanian market. The external suppliers of the Logan components realized fairly early on that it was much more cost effective to manufacture in Romania. Companies, such as Valeo and Euro APS, have begun to produce not only for Dacia-Renault but also for other European manufacturers.

Why is it that only the car component manufacturers are interested in penetrating the market? To get the final car, the car manufacturers need to have a large and long-term secured market. Renault approached Dacia, based on these characteristics.

The second point is the super bureaucratic aspect of the initial phase of the investment. These companies manufacture subassemblies. They will bring in their know-how and will be dependent on the cheap labor they’ll try to specialize. The subassemblies represent the second phase.

The third phase can’t be omitted – the car production. As the manufacture of car parts is a cost-effective business, some of the traditional suppliers of Renault are gearing up to pour millions of euros into setting up production facilities and launching businesses in Romania. Dourdin group, a manufacturer of hood and aluminum grill ornaments, recently announced it had opened a subsidiary in Romania and was ready to begin production with investments on the order of several million euros. The facility in Romania forms part of the agreement that Dourdin group has with Dacia-Renault to produce parts for Solenza in Turkey. Thanks to the new Logan project, they have now also secured a supply contract with Dacia-Renault and we will begin production locally and the production from Turkey will be transferred to Romania. The company’s headquarters and production facility were set up near Bucharest. Production is currently in the testing phase. The remaining equipment is slated to arrive shortly from Western Europe. Under the contract negotiated with the Dacia carmaker, Dourdin will produce up to 600 pieces daily with the plant projected to work at full capacity.
The local subsidiary of French-based tire producer Michelin announced a USD 30 million investment in its manufacturing operations in Romania. The investment, which will be spread across the following three years, will support the establishment of a new steel-cord for tires facility in Salaj. In addition, the money will also go towards upgrading Michelin’s existing facilities in Zalau and Floresti.

Sub-assembly producer Auto Chassis Int’l opened a production facility in Mioveni, Arges County, and will reportedly invest USD 81 million over the next three years. SNR Rulmenti in Sibiu, a Renault subsidiary, specializes in producing bearings for gearboxes for Renault and several leading carmakers such as Nissan, Peugeot, Volkswagen, Audi, Fiat and General Motors. A production plant in Sibiu represents the first stage of an USD 18 million investment.

Pirelli of Italy and Continental of Germany recently formed a joint venture to build a USD 48 million metallic cord plant in Slatina.  Continental will cover approximately 20 percent of the costs.

The Tunisian company Coficab has announced plans to invest USD 30 million in a green field investment for the production of electric wiring for the car industry. With profits on the order USD 119 million, Coficab is one of the main producers of car electric wiring in Europe and North Africa. Coficab is part of the Ellouni Group of companies.

German company Ruwel has announced it will to invest some USD 90-95 million in a project to produce electric wiring, in the Cluj Industrial Park. The company’s CEO, Wilfried Sehner, declared in a recent press report, that the firm is awaiting approval for a refinancing project from the European Investment Bank, which will reportedly cover 75% of the investment costs.

Auto Chassis International, a member of the French Group Renault, will invest USD 81 million over the next few years to develop a production unit near Mioveni (Arges) to produce auto parts chassis to be delivered to subsidiaries in Romania, Slovenia and Turkey.  ACI will be located in the industrial area near the Dacia supplier and will also provide components for the Renault Clio and the Nissan Micra.

Autoliv, the Swedish producer of safety systems including safety belts, airbags, will transfered a portion of its production capacity from Germany to Romania at the end of 2005. The decision is part of a strategy to relocate to Southeastern Europe, due to lower workforce costs. Autoliv has been in Romania since 1997 providing safety systems to the Dacia and Daewoo factories.

The German firm Kromberg & Schubert will open a plant in Medias to manufacture electric wiring production. Towards that end, the firm has rented production facilities from Automecanica SA.

When Romania joins the European Union, probably in 2007, the Romanian market will likely experience a boom in used car imports, as all the restrictions on imports of used cars will be lifted.  As such the market will experience a corresponding increase in auto parts sales and production. To regulate the used vehicle market, the Association of Car Manufacturers and Importers (APIA) officials will design a catalogue of the prices of used cars to begin creating market standards.

Legal framework

More restrictive rules on automotive market
Officials from the Competition Council APIA debated a new regulation regarding the enforcement of the Competition Law within the automotive sector, which was published in Monitorul Oficial, no. 280 on March 31, 2004. According to the regulation, which went into effect on January 1st, 2006 contracts for new vehicle distribution and after-sale services (spare parts and repairing and maintenance services) will be evaluated in terms compliance with the stipulations of the Competition Law. The implementation of the new provisions as well as future cooperation between the Competition Council and APIA will be to the advantage of both sides, fostering competition in the automotive market to the ultimate benefit of the consumer.

The characteristics of the automotive market necessitate the signing of agreements between representatives of the production/distribution chain, spare parts and after sale services and more restrictive rules to be enforced when evaluating the vertical agreements. To comply with these conditions, manufacturers and dealers will have to modify their contracts, by introducing or eliminating certain clauses. If the conditions are not met, the contractual parties will have to ask for licenses individually, for each contract. The objective of the new regulation is to strengthen competition in the new vehicle distribution market and on after sale services, through better positioning of dealers versus the producers.


 


 

 

 

 

 


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