Croatia Autos Report 2010

Croatia’s car market remained reasonably buoyant for 2008 as a whole. This was largely due to strong sales early in the year. Confirmed 11M08 data show a rise in new passenger car sales of 7.7% year-on-year (y-o-y), up to 82,872 cars from 76,919 over the same period of 2007, according to local agency Promocija Plus. However, the global economic downturn was clearly beginning to bite into the industry’s fortunes in H208, as monthly data began to show marked y-o-y declines in sales. Data for January and February 2009 was particularly alarming, as sales of new passenger cars showed a fall of 40.9% y-o-y, down to 8,394 vehicles, according to Promocija Plus.

The outlook for the year as a whole is therefore highly challenging. The Croatian economy is likely to contract by 1.5%, according to BMI’s macroeconomic team. Private consumption has weakened dramatically in the year thus far and is likely to continue contracting, compounded by falling exports and a consequent rise in unemployment. We therefore predict that car sales in Croatia will undergo a fall of 22% y-o-y for the year. In 2010, we predict that the economy will return to positive GDP growth, driven by a modest recovery in the eurozone. However, that recovery will be subdued, with Croatia predicted to generate annual GDP growth of just 1.0%. As such, we predict only modest growth in car sales in 2010, 3% for the year as a whole, despite the low base provided by the very low forecast for 2009 sales. Private consumption will remain weak, particularly in the first few months of 2010 as consumers put off purchases of big ticket items until they are more confident about their job security and earnings prospects.

However, over the long-term, car sales growth should rebound strongly from the low base created by our forecasts for 2009-2010. With car ownership considerably short of saturation levels, we predict passenger car sales growth of 15% in 2011 and 12% in 2012.

Risks to our 2010 forecast are to the downside. There is more than a slight chance that the recession in developed markets will persist well into 2010 (and possibly even beyond). This would likely mean a continued recession in Croatia through much of 2010 and a continued fall in car sales for the year.

In this latest Croatia Automotives Report, BMI extends its company analysis, evaluating the strengths and weaknesses of AutoZubak (supplied by Volkswagen (VW)) and Renault Hrvatska, against the backdrop of the current global economic downturn.