Hungarian automotive industry: week six

Deficit

Hungary's government has posted HUF 75.4 billion deficit in January 2014, which corresponds to 7.7% of the full-year deficit target of HUF 984 bn. Minister for National Economy Mihály Varga says this equals previous expectations. This year's budget did not need to be changed as a result of the low forint against the euro, the Government will try to control public finances in 2014 as well and the budget deficit will be below 3 percent. The Government is expecting the markets to calm down after this temporary fluctuation, said Mihály Varga.

The Hungarian Export-Import Bank (Eximbank) extended its export credit refinancing framework program. The related agreement with twelve credit institutions was signed by Minister for National Economy Mihály Varga and Eximbank CEO Roland Nátrán in Budapest. Budapest Bank, CIB, Commerzbank, Erste Bank, Gránit Bank, K&H Bank, MKB, OTP, Raiffeisen, Sberbank Hungary, Takarékbank and UniCredit joined the agreement, which means that the Eximbank credit facility will be made available through these credit institutions.

Forint

The forint did not decline further from last week's slump, although the exchange rate fluctuated against the euro. After it was revealed that EKB will keep the exchange rate and a zero percent deposit rate, the forint started to weaken, which was followed by another strengthening. Analysts say the forint will stay in the 300 region versus the euro, but we shouldn't exclude the possibility of a rate as high as 320. There are still a lot of questions around the National Bank of Hungary's (NBH) possible rate hike, according to London-based analysts, the base rate could be as low as 2.5 percent.

Suzuki to produce more cars in Hungary in 2014

Based on recent stress tests, NBH says that Hungary's financial stability could only be affected negatively by an exchange rate much worse than what we saw last week. Analysts say that the National Bank's strategy might involve a rate hike should the forint reach the level of 340 against the euro, but, if possible, it will continue lowering interest rates amid normalising market conditions.

Optimism

For the next year enterprises are projecting an income and profit growth of 5.3 and 2.6 percent on average, respectively. The most optimistic companies concerning their financial situation are micro companies. Moreover, the deadlines fulfilment of customer and supplier invoices have got closer to one another, decreasing the time span of financing, which improves the companies' liquidity situation, reported K&H in its latest SME confidence index survey.

The majority of SMEs (51 percent) are expecting an income growth of 0 to 6 percent, however, more and more companies (34 percent) are prognosticating a more significant increase. The proportion of companies projecting a decrease did not change compared to the previous quarter (15 percent).

In the next period, automotive OEMs around the world will focus on growth and job creation, reported Ernst&Young (EY) in its global industrial survey.

Industrial production

In December 2013 industrial production rose by 6.8% compared to the same month of the previous year, the index adjusted by working days grew by 4.4%. The volume of industrial production in December – according to seasonally and working-day adjusted indices – was below the level of the previous month by 1.9%. 2013 industrial gross output was 1.4% higher than in 2012.

Hungary's government signed a strategic partnership agreement with brake systems manufacturer Knorr-Bremse

In December 2013, the volume of retail sales – according to the first estimate – increased year-on-year by a calendar adjusted 1.8%.

In January–December 2013, exports and imports in EUR terms grew by 2.5% and 1.8%, respectively. The surplus on the trade balance was EUR 617 million more than in the period of January–December 2012, reported the Hungarian Central Statistical Office based on preliminary data.

New tyre manufacturer on the horizon

After Hankook, Bridgestone and Michelin, another tyre manufacturer is expected to invest in Hungary, reported the Financial Times. Instead of the U.S. and China, India-based tyre manufacturer Apollo Tyre is focusing on Eastern Europe and the south-eastern part of Asia, building two new plants in these regions. According to the newspaper, one of those plants could be built in Hungary. The company already made preparations for the construction of a plant in Gyöngyös, Hungary, in 2008 but at that time the investment fell through.

Banks

Based on preliminary data, as a result of several positive factors, the National Bank of Hungary (NBH) registered a profit of tens of billions of HUF last year, even though the Bank's December 2012 prognosis forecasted a deficit of HUF 203 billion for 2013. FHB Mortgage Bank Co. Plc. gained 25% direct share in Magyar Takarék Befektetési és Vagyongazdálkodási Zrt. (MTBV), announced the company on the website of the Budapest Stock Exchange in an extraordinary announcement.

According to the announcement, FHB did so through participating in the share capital increase decided by the general meeting of MTBV Zrt. with a payment at HUF 252,000,000 nominal value.

Intesa Sanpaolo appointed Pál Simák to the position of the president of management and CEO of CIB Bank, the group's Hungarian concern, effective from April 2014. Prior to the announcement, Simák was the president and CEO of MKB Bank, Hungary's largest financial institution.

Premium car manufacturing is revving up in Hungary

Automotive record

"The automotive industry is the flagship of the Hungarian economy and the stronghold of Europe's vehicle production," said Minister of State Péter Szijjártó at the first Hungarian automotive summit, held by the Hungarian Investment and Trade Agency (HITA), in which 200 manufacturers and suppliers took part.

In Hungary 712 automotive companies provide work for as many as 115,700 people. 12 of the 39 strategic agreements with large companies were concluded with automotive companies. Read more about the event in our detailed article.

Manufacturers

Daimler reported on a successful year in its 2013 annual report. The German premium manufacturer's sales in Q4 increased by 9 percent, (by 651,000 units) compared to the previous year. The success of the A-Class, B-Class and the CLA, made exclusively in the Hungarian plant, in the U.S. also contributed to the Group's exceptional results. The company registered a 64 percent growth in the premium compact segment.

Esztergom-based Magyar Suzuki is planning to produce 200,000 cars, up from the 161,000 manufactured last year, said László Urbán, Deputy-CEO at HITA's automotive event.

Domestic automotive manufacturing is revving up, Audi is planning to produce 125,000 cars, Mercedes 100,000 and Suzuki 200,000. This is the double of the production volumes in 2012 and over 100,000 units more than last year.

We reported that the 1.6 CDTI engine, made at Opel's Szentgotthárd engine plant, is now also available in the high-volume Astra hatchback, Astra notchback and Astra Sports Tourer models.

The Association of Hungarian Automotive Industry (AHAI) held its first meeting this year, where the Association evaluated the previous year, presented its financial situation and drafted the tasks, measures and plans planned for 2014.

Suppliers

Nagyatád-based automotive company Büttner Kft. received EU support for a HUF 433 million development project.

Rolling bearing manufacturer FAG Hungary carried out an over HUF 1.5 billion investment project at its Debrecen plant, announced the company last week. A a successful partner of automotive manufacturers, Germany-based Schaeffler group is a leading manufacturer of rolling bearings and clutch systems, employing 76,000 people at 180 locations worldwide. The Group's three strongest brands are INA, FAG and LUK.

Knorr-Bremse concluded a Strategic Partnership Agreement with Hungarian Government last week, promising to increase the number of Hungarian companies in its supplier chain. Following the signing of the Agreement, the new test facility of Knorr-Bremse was opened, in which braking systems are tested at a temperature of -75 degrees Celsius.

Rába Vehicle Ltd. signed a supplier contract valid until the end of 2016 with Joseph Vögele AG, one of Europe’s leading construction vehicle manufacturers. Rába obtained the right to manufacture the chassis of the improved asphalt paver as a new supplier.

In our interview with Róbert Keszte, the CEO of Continental described the process of becoming a supplier of the German giant.

We presented W.E.T., a Hungarian seat heaters and ventillator systems manufacturer and supplier of almost every premium car maker.

Education

On the last day of January, a conference was held at the Hungarian Academy of Sciences on domestic automotive training and the present and future of R&D. Autopro also took part in the event, where we sat down with the rectors of universities engaged in engineer training within the scope of a roundtable meeting.

The Hungarian Central Statistical Office (KSH), portfolio.hu and bse.hu contributed to this article.