Development of the automotive supplier industry in Eastern Europe

The automotive supply industry is becoming a major player in Central and Eastern Europe (CEE). By 2013, every tenth car manufactured worldwide will be from the region. The supplier industry in particular can currently boast high growth rates of 14.5% (Western Europe: 2.5%). Besides the traditional automotive countries – Slovakia, the Czech Republic and Poland – Russia is becoming the key market for the future. But Romania and Turkey, too, are appearing on suppliers' radar screens.

The region's market leaders are overwhelmingly local subsidiaries of large international suppliers. In contrast, domestic companies are smaller, only locally active, less profitable and grow considerably more slowly. The problems in this scenario are that know-how and profits are often siphoned off and important decisions are made in HQ somewhere else in the world. The local supplier base must be strengthened so that a long-term regional supplier industry can develop. This industry would then manufacture premium quality components and be able to survive disappearing cost advantages – as is the case in Austria.

Conclusion for managers: In Central Europe, productivity must be increased to offset declining cost advantages. Growth is also expected to slow down starting in 2010, if not before. Southeastern Europe must prepare itself for the coming second wave of investment and ensure the quality of its labor force and products. The CIS countries should focus on building up national supplier industries and achieving international quality standards. Turkey is a special case; since it can establish itself as a bridge to the Middle East, it offers a long-term promising alternative. However, its political development remains an open question.