Further round of Russian sanctions could hit Czech car producers
Speculation has been raised in the Russian media that Moscow’s next retaliatory sanctions against the European Union and West could cover car imports. If that were the case, then the Czech Republic’s biggest industrial companies and exporters could suffer an unwelcome, but not fatal, blow.
Month after month, year after year, car sales top the table of goods shipped abroad and are the Czech Republic’s single biggest export product. Given the relatively small size of the Czech domestic market, most of the cars produced by the three locally based car manufacturers, Škoda Auto, Hyundai; and the Peugeot Citroën Toyota joint venture are sold abroad.
Russia, given the collapse of most of its local car producers and the growing middle class, represents a major market for Škoda Auto and Hyundai’s Czech unit in particular.
Škoda Auto is in a particular position on the Russian market with most of the sales there covered by two local assembly plants; one at Kaluga and the other at Nizhny Novogorod (formerly known as Gorky). Still, Czech-built cars are still reckoned to make up around 20 percent of the overall Russian sales. The cars exported are mostly at the higher end of the range - since Russian import charges mean that shipping cheaper models with lower margins makes little sense – and are often special or diesel versions.
If Russian sanctions on car exports were imposed, it is likely that the local production would escape the punitive measures so Škoda Auto should hang onto most of its market share unless the parts for assembly were also covered by any measures.
Of all the three, the TPCA joint venture looks on the face of it to be the least exposed. Most of its production is shipped to Western Europe and covers the lower part of the market. But the indirect impact of a Russian sales ban could also be felt by the firm through higher competition and lower prices on its main markets.
Although there is little doubt Russian sanctions could hurt Czech manufacturers, the European market at least is looking fairly healthy and could take up some of the thwarted demand. European car sales rose 6.6 percent in the first half of this year, according to manufacturers’ grouping ACEA. And although the figures from some of the last months are a little weaker, it still looks like a market that is recovering from the worst.