SOFIA (Bulgaria), July 21 (SeeNews) – The auto industry in Central and Eastern Europe (CEE) remains heavily dependent on external demand despite more dynamic car sales at home, the local unit of French credit insurance agency Coface said on Tuesday.
The CEE countries, however, remain an attractive destination for investments by automotive giants, Coface said in a press release.
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The region attracts investments mainly with low labour costs, geographical proximity to Western Europe, educated professionals and improving business climate, it added.
Romania is among the countries in the region that saw highest growth in car production over the past ten years, Gregorzh Shilevich, chief economist of Coface for the region, said in the statement. "However, high growth can not continue forever because eventually the market will be saturated."
The recovery of the eurozone, which is the main export market of the auto companies in the region is offsetting a drop in demand on the part of Russia, according to Coface.
Domestic demand on too is picking up thanks to positive developments in the labour market, low inflation, low oil prices, increased consumer confidence and attractive interest rates, it added.
However, the increase in domestic spending will not be enough to make the automotive sector in Central and Eastern Europe independent from external demand, according to Coface.
Although the automotive market in CEE is showing an increase in sales, this does not automatically translate into higher profit margins, Coface noted. Many of automotive companies are still suffering from overcapacity, customer expectations for greater discounts and from some dealers' actions.