THE AUTOMOTIVE AND CONSTRUCTION EQUIPMENT INDUSTRY ROMANIA Fact Pack

1
THE AUTOMOTIVE AND CONSTRUCTION EQUIPMENT
INDUSTRY ROMANIAFact Pack

• Swedish Trade Council in Romania
• 2006

2
CONTENT

• Overview Romanian Manufacturing Industry
• Romanian Automotive Industry
• Romanian Construction Equipment Industry
• Recommendations
• References

3
THE MANUFACTURING INDUSTRY IN ROMANIA IS 4 TIMES
SMALLER THAN THE SWEDISH MANUFACTURING INDUSTRY-
the automotive industry is traditionally strong
in Romania
5 largest manufacturing industries in Romania

• The total turnover of the Romanian manufacturing
  industry is SEK 330 billion
• the Swedish manufacturing industrys turnover is
  SEK 1,357 billion
• Romania is a highly industrialized country. Its
  share of the GDP is 28 and the contribution to
  foreign trade is 94
• The automotive and machine engineering industries
  are traditionally strong
• The average wage for an industry worker in
  Romania is SEK 16 per hour

Billion SEK
The automotive industry is Romanias most
important manufacturing industry
Source Romanian Institute of Statistics,
Eurostat, Romanian Agency for Foreign Investment
4
CONTENT

• Overview Romanian Manufacturing Industry
• Romanian Automotive Industry
• Passenger Cars
• Commercial Vehicles
• Suppliers
• Romanian Construction Equipment Industry
• Recommendations
• References

5
THE ROMANIAN PRODUCTION OF CARS, CAR PARTS AND
COMMERCIAL VEHICLES TOTALS SEK 37 BILLION- the
industry grew more than 70 in 2005
Production of cars and commercial vehicles in
Romania
billion SEK
Romanian Companies SEK 10,5 billion
Foreign Companies SEK 27 billion
Growth is mostly due to higher exports
Source Romanian Automotive Association
6
ALMOST 200,000 VEHICLES WERE PRODUCED IN
ROMANIAIN 2005 - 174,500 passenger cars and
20,000 commercial vehicles
Source The Association of Automotive Producers
and Importers of Romania
7
CONTENT

• Overview Romanian Manufacturing Industry
• Romanian Automotive Industry
• Passenger Cars
• Commercial Vehicles
• Suppliers
• Romanian Construction Equipment Industry
• Recommendations
• References

8
THE PASSENGER CAR PRODUCTION IN ROMANIA IS
INCREASING
Passenger Car Production in Romania
Development the last 5 years

• The increased production is mostly due to the
  introduction of the Logan
• In 2006 the production of passenger cars in
  Romania is expected to reach 250,000 units, Logan
  accounting for almost 220,000 vehicles
• As the vehicle production has increased
  dramatically over the last two years (more than
  100) there has been a surge in sales
  opportunities for Tier 1 Tier 2 suppliers
• There are now 7 colleges in vehicle technology,
  producing 500 graduates yearly
• Some foreign journalists refer to Romania as to
  the Detroit of Europe

Vehicles
9
PURCHASE DECISIONS ARE MADE BOTH IN ROMANIA AND
ABROAD - For Dacia the most important purchasing
decisions are taken by Renault in France
Passenger Cars
Source Kompass Company Database, STC interviews
10
THERE ARE 2 CAR MANUFACTURING PLANTS IN ROMANIA-
Dacia is the largest producer of cars in Romania
Pitesti (Mioveni)
Craiova
Bold Head office
Source The Association of Automotive Producers
and Importers of Romania
11
PRODUCTION OF PASSENGER CARS IN ROMANIA IS
EXPECTED TO INCREASE IN THE FUTURE
Trends within the Romanian passenger car industry

• As production is moving east, Romanias role in
  the automotive industry is increasing
• Romania has one of the lowest production costs in
  Europe
• Establishment in Romania leads to a stronger
  market presence in CEE
• Romanias automotive industry is estimated at a
  turnover of SEK 120 billion in 2010

Production is moved to Romania

• Increased competition and continuing price
  reductions, especially in the small and medium
  car segment
• There is a continuous process of cutting costs
  Renault (through Dacia) is increasing the
  operations in Romania in order to stay
  competitive

Competition and price reductions

• Even more RD is being carried out by the
  suppliers
• Dacia has started to outsource some of its RD
  activities to the suppliers
• Many foreign suppliers are establishing RD and
  production activities in Romania in order to meet
  Dacias demand

RD-displacement
Source STC analysis
12
CONTENT

• Overview Romanian Manufacturing Industry
• Romanian Automotive Industry
• Passenger Cars
• Commercial Vehicles
• Suppliers
• Romanian Construction Equipment Industry
• Recommendations
• References

13
THE COMMERCIAL VEHICLE PRODUCTION IN ROMANIA IS
DOMINATED BY VEHICLES UNDER 3,5 TONNES
Commercial Vehicle Production in Romania
Development the last 5 years

• The production of heavy trucks has been held
  constant at relatively low levels, due to a small
  demand as a result of a fierce competition from
  imports
• The light commercial vehicles are mainly produced
  by Dacia and the production figures are expected
  to stay relatively constant unless new models are
  introduced
• The production of busses has been almost
  inexistent, due to Romans failure of bringing
  new models into the market
• The bus production is however expected to take
  off as Roman introduced a new model late 2005
• Mercedes is considering opening a bus production
  facility with a capacity of up to 1,000 buses in
  Romania

Vehicles
Source The Department of Trade and Industry, UK
14
ALL THE PURCHASE DECISIONS FOR THE HEAVY TRUCKS
PRODUCER ARE MADE IN ROMANIA
Commercial vehicles
Source Kompass Company Database, STC interview
15
THE COMMERCIAL VEHICLE INDUSTRY IS CONCENTRATED
IN THE CENTER OF THE COUNTRY
Brasov
Pitesti (Mioveni)
Source Company websites, STC interviews
16
COMMERCIAL VEHICLE PRODUCERS ARE CONSIDERING
PRODUCTION IN ROMANIA
Trends within the Romanian commercial vehicle
industry

• The globalization in the commercial vehicle
  industry has so far been moderate
• There is no foreign producer, and the incumbent
  producers (Dacia and Roman) have not managed to
  become successful
• At present the Romanian production of commercial
  vehicles is low

Globalization

• Increased competition and continuing price
  reductions
• Increased competition from abroad has
  dramatically reduced sales for Romanian
  commercial vehicle producers
• Commercial vehicle importers have experienced
  large sales increases

Competition
Market Trends

• Large commercial vehicle producers are
  considering the possibility of establishing
  production in Romania
• Companies are exploring the possibility of
  finding suppliers in Romania, which provides
  opportunities for foreign T1 suppliers to start
  operations in the country

Source STC analysis
17
CONTENT

• Overview Romanian Manufacturing Industry
• Romanian Automotive Industry
• Passenger Cars
• Commercial Vehicles
• Suppliers
• Romanian Construction Equipment Industry
• Recommendations
• References

18
THERE ARE ABOUT 300 AUTOMOTIVE SUPPLIERS IN
ROMANIA- more than 20 are foreign
Geographical concentration of automotive
suppliers
Romanian automotive suppliers

• There are approximately 300 suppliers to the
  automotive industry in Romania
• There is a high concentration of automotive
  suppliers in western Romania, but as Dacia is
  located in the centre of the country many
  suppliers have established themselves in that
  region as well
• There are around 100,000 employees in the
  automotive component sector in Romania
• The traditional strong segment is electrical
  systems, although automotive software development
  is now highly targeted by foreign players

19
MAJORITY OF WORLDWIDE T1 SUPPLIERS PRODUCE IN
ROMANIA- Continental is the largest investor
among T1 suppliers
TIER 1 SUPPLIERS
Electrical systems
Interior equipment
Propulsion
Body
Running gear

• Cables, bus systems, embedded systems
• Dräxlmaier
• Delphi Packard
• SiemensVDO
• KrombergSchubert
• Alcatel
• Lear Corporation
• Alcoa Fujikura
• Leoni Wiring Sys.
• Suleve

• Power train, exhaust systems, engines
• Borla
• Cortubi
• Honeywell Garett
• Pulsor
• Compponente Auto
• Topoloveni

• Cockpit, seats, dash-board, air conditioning
• Johnson Controls
• Faurecia
• Continental
• Valeo
• Calsonic Kansei

• Body, roof, glass, doors, lighting etc.
• Autoliv
• BOS
• Hella
• Bosch
• Rolem
• Valeo
• Gean Otomative

• Suspension, brakes, axles, steering, tyres
• Continental
• Michelin
• Pirelli
• Takata Corporation
• Bega Tehnomet

Source STC analysis
20
MAJORITY OF PURCHASE DECISIONS ARE MADE IN THE
COUNTRY OF ORIGIN (1/3)
T1 Suppliers General Automotive
Source STC analysis
21
MAJORITY OF PURCHASE DECISIONS ARE MADE IN THE
COUNTRY OF ORIGIN (2/3)
T1 Suppliers General Automotive
Source STC analysis
22
MAJORITY OF PURCHASE DECISIONS ARE MADE IN THE
COUNTRY OF ORIGIN (3/3)
T1 Suppliers Electrical Systems
Source STC analysis
23
T1 SUPPLIERS ARE MAINLY LOCATED IN THE WESTERN
PART OF ROMANIA
Componente Auto Topoloveni
Source STC analysis
24
THERE ARE gt30 FOREIGN T2 SUPPLIERS LOCATED IN
ROMANIA- Many foreign T2 suppliers start
production here in order to be closer to their
customers
TIER 2 SUPPLIERS
Electrical systems
Interior equipment
Propulsion
Body
Running gear

• Cables, bus systems, embedded systems
• Ruwel
• Schlemmer Romania SRL
• EKR Electrokontakt
• ZES Zollner Electronic

• Power train, exhaust systems, engines
• Componente Auto
• Manufactura Moderna de Metales
• Eckerle
• Altur

• Cockpit, seats, dash-board, air conditioning
• Rolem
• Automotive Complete Systems

• Body, roof, glass, doors, lighting etc.
• Gerom
• Autoflex

• Suspension, brakes, axles, steering, tires
• Pirelli
• Continental
• Michelin
• Compa
• Asam

Source Company websites, STC analysis, Ziarul
Financiar Daily
25
ALMOST ALL PURCHASE DECISIONS ARE MADE IN ROMANIA
T2 Suppliers
Source Company websites, STC analysis
26
ALMOST ALL PURCHASE DECISIONS ARE MADE IN
ROMANIA, CONT.
T2 Suppliers
Source STC analysis, company websites
27
SUPPLIERS ARE MOVING PRODUCTION TO ROMANIA TO CUT
COSTS
Trends within the Romanian Automotive supplier
industry

• Production is moving east
• Romania provides a cheap and high skilled labor
  force
• Strengthen market presence on new strategic
  market
• T1 puts pressure on T2 suppliers to move to
  Romania

Globalization

• Increased competition and continuing price
  reductions
• The pressure to reduce costs enforced by vehicle
  manufacturers has lead both T1 T2 suppliers to
  establish production in Romania

Competition and price reductions

• Even more RD is being carried out by the
  suppliers
• Tier 1 suppliers such as Continental, Autoliv and
  Siemens are opening RD centers in Romania

RD-displacement
Source STC analysis
28
CONTENT

• Overview Romanian Manufacturing Industry
• Romanian Automotive Industry
• Romanian Construction Equipment Industry
• Manufacturers
• Suppliers
• Recommendations
• References

29
THE ROMANIAN PRODUCTION OF CONSTRUCTION EQUIPMENT
TOTALS ABOUT SEK 300 MILLION
Production of construction vehicles in Romania
M SEK

• The Romanian construction equipment industry is
  smaller today compared to 1990
• Many companies still employ over 1,000 employees
  although the order book is empty
• Massive lay-offs have occurred in the industry
• Few investments have been made in this sector,
  and traditionally the construction equipment
  industry has not been targeted by foreign
  companies
• Most vehicles purchased in Romania today are
  imported from abroad

Growth is mainly the result of price increases
Source STC interviews
30
LESS THAN 1,000 CONSTRUCTION VEHICLES ARE
PRODUCED IN ROMANIA
Source Company representatives
31
THE PURCHASING DECISIONS FOR THE CONSTRUCTION
EQUIPMENT INDUSTRY ARE TAKEN IN ROMANIA



Source Internet, STC analysis
32
THE CONSTRUCTION EQUIPMENT INDUSTRY IS LOCATED
MAINLY IN EASTERN ROMANIA
Source Company websites, STC analysis
33
CONTENT

• Overview Romanian Manufacturing Industry
• Romanian Automotive Industry
• Romanian Construction Equipment Industry
• Manufacturers
• Suppliers
• Recommendations
• References

34
THE LARGEST SUPPLIERS TO THE CONSTRUCTION
EQUIPMENT SECTOR ARE ROMANIAN
SUPPLIERS
Electrical systems
Interior equipment
Propulsion
Body
Running gear

• Cables, bus systems, embedded systems
• Rombat

• Power train, exhaust systems, engines
• SC Motoare AB
• Electrotimis

• Cockpit, seats, dash-board, air conditioning
• N/A

• Body, roof, glass, doors, lighting etc.
• Gerom

• Suspension, brakes, axles, steering, tires
• hydraulics, hoses
• Tofan
• Rulmentul Brasov
• Hidraulica UM Plopeni
• Hidraulica
• Fermit

Source STC analysis
35
ALL PURCHASE DECISIONS ARE MADE IN ROMANIA- All
suppliers to the construction equipment sector
are Romanian
Business
Purchase decisions
Employees
Manufacturer
Rubber Tyres
HQ, Bucharest, Romania
100
Tofan
Bearings
HQ, Brasov, Romania
Rulmentul Brasov
N/A
Engines
HQ, Brasov, Romania
N/A
SC Motoare AB
Windows Safety Glass
HQ, Buzau, Romania
300
Gerom
Suppliers
Hoses Seals
HQ, Brasov, Romania
N/A
Hidraulica
Pumps Hydraulics
HQ, Plopeni, Romania
N/A
Hidraulica UM Plopeni
Electrotimis
HQ, Timisoara, Romania
Electric Engines
200
HQ, Bistrita, Romania
Rombat
500
Rombat
HQ, Ramnicu Sarat, Romania
Brakes
435
Fermit
Source Kompass Database, STC
36
SUPPLIERS TO THE CONSTRUCTION EQUIPMENT SECTOR
ARE MAINLY LOCATED IN CENTRAL AND EASTERN ROMANIA
Rombat
Hidraulica
Rulmentul Brasov
SC Motoare AB
Fermit
Hidraulica UM Plopeni
Electrotimis
Gerom
Tofan Group
Bold Head office
Source STC analysis
37
THE PRODUCTION OF CONSTRUCTION VEHICLES IN
ROMANIA IS LOW - sales are mainly due to imports
Trends within the Romanian Construction Equipment
industry

• The demand for domestically produced vehicles is
  low
• The construction equipment sales are mainly due
  to imports
• Sales of imported vehicles are expected to
  increase even more in the future

Sales

• As the production of construction equipment
  vehicles is low the suppliers of subcomponents
  have not invested in new technology
• The lack of domestic suppliers of parts increases
  production costs

Sub components

• The manufacturers have downsized the operations
  considerably
• Many workers in the sector have been laid off
• The investment in the production facilities after
  1990 have been almost inexistent

Domestic production
Source STC analysis
38
CONTENT

• Overview Romanian Manufacturing Industry
• Romanian Automotive Industry
• Romanian Construction Equipment Industry
• Recommendations
• References

39
RECOMMENDATIONS FOR MAKING BUSINESS WITH THE
ROMANIAN AUTOMOTIVE INDUSTRY
Recommendations for making business with the
Romanian automotive industry
Country specific
1.
Personal contacts and relationships are important
when doing business in Romania
If production is established, it is advisable to
find local managers and make a Greenfield
investment
2.
3.
Verbal agreements are not binding, written
contracts must be made
Industry specific
1.
Romanian automotive industry workers are skilled
and provide a basis for producing parts for a
growing local market and worldwide customers
2.
Specifically Romania is suitable for production
of advanced automotive components such as
automotive software due to its skilled engineers
3.
Business with the foreign automotive companies
producing in Romania often have to be conducted
in the country of origin
Source STC analysis
40
CONTENT

• Overview Romanian Manufacturing Industry
• Romanian Automotive Industry
• Romanian Construction Equipment Industry
• Recommendations
• References

41
STC CAN SUPPORT COMPANIES TO DO BUSINESS IN
ROMANIA
Market Check
Survey of the Romanian market, mapping all the
relevant players in the field such as potential
customers and competitors. Estimation of product
sales figures and prices, customs legislation and
certification requirements.
Distribution search
Short list and contact the most relevant
distributors, initiate discussions to check
suitability and product interest. The Swedish
representatives together with an STC Bucharest
employee visit the proposed distributor.
Customer Acquisition
Short list and contact the most relevant
potential customers (preferred customer profile
agreed upon with the Swedish company). STC
performs customer visits and follows up the visit
in order to monitor interest.
Certification
STC provides information with regards to
certification requirements and forwards contact
details of relevant certification bodies. STC can
also give information with regards to environment
rules and regulations.
Supplier search
Through desk research and interviews STC produces
a short list of relevant potential suppliers
(supplier profile agreed upon with the Swedish
company). STC contacts the suppliers and if
necessary performs company visits.
Company establishment
STC intermediates contact with a law firm that
does all the necessary work in order to establish
the company in Romania. Contacts with other
parties, e.g., real estate companies and
recruitment agencies can be established.
Legal
STC intermediates contact with suitable law firm,
both in Bucharest and in the rest of the country.

42
STC CARRIED OUT AN ASSESSMENT OF ROMANIA AS A
COUNTRY TO INVEST IN FOR TRELLEBORG
Goal
Outline of project
The main objective of the project was to support
Trelleborg in assessing the possibility of
investing in Romania in order to strengthen the
companys presence in CEE

Step1 Brief analysis
Completed
Kick-Off
STC role and contribution

• Location analysis
• Sector analysis

• A general market analysis
• Evaluate potential of establishing operations in
  Romania.
• Recommend location based on state of
  infrastructure, availability of qualified workers
  and land prices
• Carrying out meetings with potential partners and
  local authorities in six short listed locations

Step 2 Visiting Program
Workshop
Workshop I

• Visits to locations selected in step1
• Meetings with local authorities, foreign
  companies and industrial park owners

Results

• At the kick- off the team from the Swedish Trade
  Council was educated and the project outline was
  discussed
• At workshop 1 the Swedish Trade Council presented
  the results from step 1 and gave recommendation
  for which location to choose

• 32 meetings with potential partners, local
  authorities and industrial park owners
• Trelleborg was recommended to chose the
  north-western part of the country as the location
  where to establish production