Poland a likely location for PSA-Toyota car project

Auto industry experts predict Poland will be awarded the lucrative PSA Peugeot-Citroen/Toyota joint venture contract to manufacture 300,000 cars a year.
By : Robert Wylot

    Thinking big: Poland has one of the largest small-car markets in Europe.

   Poland is the odds on favorite to win a E1.5 billion investment by a joint venture between France’s PSA Peugeot-Citroen (http://www.psa.fr) and Toyota of Japan, auto market analysts and industry sources said last week.

   “I think the plant will be built in Poland,” said Sadok Moussa, auto market analyst at BNP Paribas Private Banking brokerage house in Paris. He said low labor costs will almost certainly play a crucial factor in the final decision, an advantage Poland has over the other main contender, France.

   When completed, the project will produce 300,000 small cars each year destined for the European market.

   Poland’s chances to land the project also received an additional boost last week when the joint management started negotiations with the Economy Ministry about possible locations in the country, the ministry said.

   “Poland has a competitive advantage over France,” Edward Nowak, deputy economy minister told the Business Journal. He said that in addition to low costs of labor, the country also has a well-developed network of automotive suppliers and a large market for small cars.

   “Incentives will also be a crucial factor and what we can offer to our partners are the conditions of a special economic zone,” Nowak said.

   Analysts said that so far no detailed negotiations have been carried out between PSA-Toyota and the French government. “As far as I know no such talks have been held,” said Christoph Laborge, auto market analyst at ING Ferri in Paris.

   “I don’t think the French government could give any major incentives to a French company (such as PSA),” Moussa said. “They (PSA and Toyota) want to produce 300,000 cars annually, so they’re thinking of a long-term investment. Low labor costs will be more important than mid-term incentives.”

   Meanwhile, analysts said France still has several factors in its favor to attract the project. “Although Poland has lower labor costs, PSA already has sites in France so distribution costs would be lower there,” Laborge said.

   But Nowak said Poland’s geographical location could play a part in the final decision. Wojciech Drzewiecki, president of Polish auto market watcher firm Samar (http://www.samar.pl), agreed.

   “Poland is situated in the region of emerging markets, where the demand for small cars is certainly set to grow,” Drzewiecki said. He added that Poland has the advantage of a huge domestic market for small vehicles, but France has the advantage of greater (political and economic) stability.

   According to Himansu Patel, an auto market analyst at JP Morgan in London, the overall cost analysis has to favor Poland for the project. “From the cost perspective, there are advantages of a location in Poland,” he said.

   Although PSA’s and Toyota’s management are likely to remain tight-lipped about the location until they reach a decision later this year, Akira Imai, president of Toyota Motor Europe, told the daily Gazeta Wyborcza that Poland is Toyota’s favored candidate.

   Also Monika Małek, Toyota Polska’s spokeswoman, is optimistic about an investment in Poland. “The chances are high,” she said.