Guide to Economic Development in the Global Auto Industry - S7

HUNGARY

Ford and partner
Koc Holding are
spending $52
million to increase
output of Transit
vans at Kocaeli.

A test track takes
Hungary deeper
into r&d

H

TURKEY

Turkish positives still bringing investment

A

utomakers have long seen Turkey as a
low-cost manufacturing opportunity,
with a healthy supply of skilled and semiskilled workers and a central location for easy
access to the European Union, Eurasia and
the Middle East.
For auto producers weighing
global investment scenarios, Turkey has attractive offerings, says
Fawaz Ahmad, an analyst at IHS
Markit.
"What is quite competitive in
Turkey are the infrastructure and
the energy supply," he said. "Energy is significantly less expensive
than in Europe, and Turkey is quite
close to Europe, so it's easy to export there."
But there is some risk at the moment, he adds.
A sharp 15 percent drop in the lira
against the dollar this year means
that raw material imports will cost
more. And worries about political
instability have had a chilling effect
on relations between Turkey and its
European neighbors.
But concludes Ahmad, "We
don't see too many downsides in
the short term."
The industry appears to agree.
Significant recent investments
include a $400 million project from Toyota to
set up production of the C-HR compact crossover for European and North American markets. Ford Motor Co. committed $52.2 million

last year to increase production of its Transit
Custom and Tourneo vans by 40,000 units a
year at the company's van and truck factory in
Kocaeli. When fully implemented, that plant will
be capable of producing 330,000 units annually.
In May, Hyundai announced that it will add
a new subcompact SUV model by 2021 to its plant in Izmit,
where it makes the i10 city car
and i20 subcompact. Meanwhile, Renault is reportedly
shifting more production of the
Clio subcompact to its plant in
Bursa.
Fiat and Honda also have important manufacturing plants
east of Istanbul, and both Ford
and Fiat have research and development centers.
The Turkish government has
not typically provided direct
incentives for the auto projects,
although r&d costs can be applied as tax credits. He added
that a recent increase in the
minimum wage by 30 percent
could put cost pressure on employers at the lower end of the
supply chain.
Companies
are
closely
watching the government's efforts to strengthen political and
currency stability.
"If Turkey can find a way to stabilize the
currency, it would help investment," the analyst said. "But Turkey really is competitive."
- peter

sigal

ungarian officials believe the country's
new $15 million Zalaegerszeg test track
will become a magnet for future auto investment. Prime Minister Viktor Orbán has gone
so far to say the track will be the genesis of "the
Hungarian automotive industry's Silicon Valley,"
putting the country firmly on the world map of
vehicle research, development and testing.
In under 30 years, Hungary has transitioned
from Communist satellite state to the European Union's fifth fastest growing economy, with
a 25 billion-euro-a-year automotive sector accounting for 30 percent of all manufacturing
output and a fifth of all exports.
Last year the Hungarian Investment Promotion Agency approved support for 36 new
automotive investments, expected to create
6,700 additional jobs on top of the nearly
160,000 already employed in the sector. Audi,
Mercdes-Benz, Opel and Suzuki have auto or
engine plants in the country. Mercedes is now
investing 580 million euros ($680 million) in upgrading and expanding capacity there, and a further $1.17 billion to build a second plant. There
are also more than 700 suppliers in Hungary.
Recent projects include new electric-vehicle battery plants by Japan-based GS Yuasa and South Korea's SK Innovation and
Shinheung Sec. Japan-based Zoltek is constructing what likely will be the world's largest carbon fiber plant. Autoneum and Rehau
both are building new plants, as is the alloy
wheel-making venture Arconic-Köfém.
But Hungary is especially keen to encourage
more r&d, officials say. The country has cut its
corporation tax rate to 9 percent - the lowest in
the EU - and introduced special tax incentives
and other benefits for companies involved in
r&d. Continental has just opened a new Deep
Machine Learning Competence Center.
The Zalaegerszeg test track is expected to
help. Designed for both conventional and
autonomous cars, it features an urban section where it will be possible to test up to 70
vehicles at the same time. Meanwhile, Bosch
Hungary has received government backing
to build a separate 10,000 square-meter test
track where it will focus on automated driving
and electric mobility.

- nick gibbs

E C O N O M I C D E V E L O P M E N T G U I D E / J U LY 2 0 1 8

7



Table of Contents for the Digital Edition of Guide to Economic Development in the Global Auto Industry

Guide to Economic Development in the Global Auto Industry - Intro
Guide to Economic Development in the Global Auto Industry - S1
Guide to Economic Development in the Global Auto Industry - S2
Guide to Economic Development in the Global Auto Industry - S3
Guide to Economic Development in the Global Auto Industry - S4
Guide to Economic Development in the Global Auto Industry - S5
Guide to Economic Development in the Global Auto Industry - S6
Guide to Economic Development in the Global Auto Industry - S7
Guide to Economic Development in the Global Auto Industry - S8
Guide to Economic Development in the Global Auto Industry - S9
Guide to Economic Development in the Global Auto Industry - S10
Guide to Economic Development in the Global Auto Industry - S11
Guide to Economic Development in the Global Auto Industry - S12
Guide to Economic Development in the Global Auto Industry - S13
Guide to Economic Development in the Global Auto Industry - S14
Guide to Economic Development in the Global Auto Industry - S15
Guide to Economic Development in the Global Auto Industry - S16
Guide to Economic Development in the Global Auto Industry - S17
Guide to Economic Development in the Global Auto Industry - S18
Guide to Economic Development in the Global Auto Industry - S19
Guide to Economic Development in the Global Auto Industry - S20
Guide to Economic Development in the Global Auto Industry - S21
Guide to Economic Development in the Global Auto Industry - S22
Guide to Economic Development in the Global Auto Industry - S23
Guide to Economic Development in the Global Auto Industry - S24
Guide to Economic Development in the Global Auto Industry - S25
Guide to Economic Development in the Global Auto Industry - S26
Guide to Economic Development in the Global Auto Industry - S27
Guide to Economic Development in the Global Auto Industry - S28
Guide to Economic Development in the Global Auto Industry - S29
Guide to Economic Development in the Global Auto Industry - S30
Guide to Economic Development in the Global Auto Industry - S31
Guide to Economic Development in the Global Auto Industry - S32
Guide to Economic Development in the Global Auto Industry - S33
Guide to Economic Development in the Global Auto Industry - S34
Guide to Economic Development in the Global Auto Industry - S35
Guide to Economic Development in the Global Auto Industry - S36
Guide to Economic Development in the Global Auto Industry - S37
Guide to Economic Development in the Global Auto Industry - S38
Guide to Economic Development in the Global Auto Industry - S39
Guide to Economic Development in the Global Auto Industry - S40
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