Inside the List: Automakers hoping for speedy recovery on local market

Although the government has severely restricted imports of second-hand cars, existing stocks continue to daunt domestic automakers, according to industry sources. The large supply of used cars coupled with a slow economy means that car sales in Poland showed only limited signs of recovery in the first quarter of 2002, with foreign producers noting the largest sales growth. But automakers are optimistic that the market is picking up and lower sales taxes on new cars combined with the excise tax on imported used cars are boosting their Polish sales. The auto industry is Poland's biggest exporter with exports of automotive products topping $4.1 billion and motor vehicles alone raising $1.4 billion in 2001, according to Economy Ministry figures. But the Polish auto market has seen annual sales plummet from 640,186 cars in 1999 to 327,245 in 2001, according to auto market research firm Samar. The impact on the industry has been severe, with layoffs at 39 of the 46 car and component manufacturers active in Poland costing around 5,200 autoworkers their jobs - 15% of the industry's workforce, according to Association of Motor Industry Employers (ZPM).

"For Polish manufacturers market conditions are still bad, with sales and their market share continuing to decline," said Wojciech Drzewiecki, president of Samar. "The market as a whole is in decidedly better shape. Although sales are still relatively low, they are beginning to slowly increase giving hope that things will further improve in the future." Auto sales fell by 3.9% year on year in March but increased in January, February and April by 21.2%, 6.2% and 6.8% respectively. Used car imports are blamed for the declining sales of Polish car maker Fiat Auto Poland, which has seen its first-quarter market share slip from 26.6% in 2001 to 17.7% in 2002, while first-quarter sales fell 47% year on year. "For the price of the Seicento, which costs zł. 20,000, it is tempting to buy a bigger used model that's more than 10 years old," said Fiat Auto Poland spokesman Bogusław Cieślar. But thanks to the February launch of its Stilo and Palio Weekend models sales have begun to recover, Cieślar said. "We sold 14,742 cars in the first quarter," Cieślar said. "Sales started to increase from March to April." U.S. automaker General Motors is also seeing signs of recovery - its market share grew from 6.5% in the first quarter of 2000 to 8.9% at the same time in 2002. "The first quarter was very, very good for our company compared to last year," said GM spokesman Przemysław Byszewski. "We put this down to a product range that is well suited to this market ... price cuts, new models and good management of car stocks." In addition to a sales tax cut, which Byszewski said allowed GM to drop prices by an average of 3%, GM is also making its products more affordable by offering more models in their standard no-frills versions.

Taxes helping, a little In March the government moved to help struggling automakers by reducing sales tax on new cars and hiking duties and registration costs on imported used cars. The new regulations place an excise tax of 15.1% on three-year-old cars with an engine size of up to two liters, 27.1% on four-year-old cars, 51.1% and 65% on cars aged five years and six years or more, respectively. For cars with engines above two liters, the figures are 25.6%, 37.6%, 49.6%, 61.6% and 65%, while the cost of registering an imported used car has rocketed from zł. 200 to zł. 1,000. Meanwhile sales tax on new cars was halved from 6% to 3% for cars with engines up to 2 liters and from 15% to 12% for cars with bigger engines. Approval of the law caused a temporary spike in imports as used car importers rushed to move their stock into Poland to take advantage of the outgoing legislation. The resulting influx of vehicles - which topped 95,000 in the first quarter according to Samar - combined with existing stocks mean that the increase in duties will not be felt by manufacturers for months. "If the law does not begin to take effect in the second half of the year, it will do so by year end." Byszewski said.

Target market But according to Jan Okulicz, spokesman for Toyota, not all automakers have been affected by second-hand imports. "Our clients do not buy imported used cars," Okulicz said. "We know our target group: intelligent people, financially independent professionals who are not directly affected by the (economic) crisis and do not buy cheap cars." Toyota benefited from shifting the production of its key models to Europe, where exports to Poland are not subject to 35% import duty. The company began manufacturing its Corolla model in the U.K. in January this year while the Yaris has been made in France since 2000, which allowed Toyota to cut prices by 3-5%, he said. The company will further reduce costs when it opens its newly completed gearbox factory in Wałbrzych in the autumn. "By the end of April we sold 7,950 cars so we are very happy," Okulicz said. "That represents growth of 70% for some models." He added that Toyota forecasts an increase in car sales from 15,000 in 2001 to 20,000 this year.