The Slovenia Times

Stalled success?



SG Automotive is a company with big plans. Last year, the car electronics specialist secured EUR 42m in sales. This year, however, the goal is to go even higher. This Slovenske Konjice-based company is aiming to secure EUR 67m of sales in 2011 and, says majority owner and director Robert Grah, "we don't intend to stop there." Talk is of expansion; of diversifying more and more into LED street lamps; of seeking out every available public tender for street lighting in Slovenia.

Grah's confidence is characteristic of the mood in much of the Slovenian automobile industry at present. Worldwide, this was an industry which was strongly challenged by the economic downturn. But it was a challenge that the Slovenian industry largely met.

Foreign friends

Some, like SG Automotive, survived by diversifying. Other firms, like headlight manufacturer Hella Saturnus, focused on keeping fixed costs low - an approach which worked; the company recorded a profit almost four times higher than expected last year.

Above all, the industry was helped by its foreign focus. Responsible for 21 percent of the total goods exported by Slovenia, the automotive industry is one of the most export-orientated industries of the Slovenian economy. According to Sonja Primožič, spokesperson at the Institute of Macroeconomic Analyses and Development, this explains in large part the industry's buoyancy during the economic downturn.

As consumers tightened their belts, many European nations introduced financial incentives to tempt owners of old cars to buy newer models. Not only did this stimulate the market, it also meant fewer environmentally harmful cars on the road - very much a win-win. According to Primožič, these so-called scrappage schemes helped the Slovenian industry cope with the crisis.

"The recovery of the production of motor vehicles in 2009 and 2010 was due to the positive effect of such scrappage schemes in major European countries, most importantly Germany, France and Italy," she explains. "These schemes stimulated purchases of smaller and environmentally friendly vehicles. They meant that production of motor vehicles exceeded pre-crisis 2008 levels in the second half of 2009, whereas other industries still lagged behind."

Scrappage scrapped

But with the first quarter of the 2011 calendar year now history, so too are the scrappage schemes. In fact, most were history at the end of 2010 - only France kept its programme going into 2011 (it ended on 31 March). Automotive companies may have big ambitions for 2011, but they will have to achieve them without the boon of government incentives to purchase new cars. Primožič expects this to have an impact.

"During the scrappage schemes, foreign demand was above average from many countries and so too were new passenger car registrations in these countries," she says. "In our expectations, the year-on-year growth of motor vehicle production will now slow down as a result of weaker foreign demand."

Going green

Maybe so, but the cars which the scrappage schemes favoured - environmentally friendly vehicles - are expected to continue to be a big area of growth for the automotive industry. And it's an area in which Slovenian firms believe they can prosper, thanks to their commitment to research and development.

"On average, Slovenia's automotive companies invest five percent of their turnover in development and 12 percent in new technologies," explains Dušan Bušen, president of the Automotive Cluster of Slovenia. "That means we have been able to seize the opportunities offered by development trends in the automotive industry including hybridization and making vehicle technology electric so as to radically reduce the use of engines."

To that end, eight companies have come together to form a consortium focused in large part on the development of hybrids and electric engines. Hidria, Cimos, Kolektor, Iskra Avtoelektrika, Iskra Mehanizmi, MLM, Polycom and TPV formed SiEVA ("Synergetic, environmentally friendly, safe car") late last year. Car electronics manufacturer Iskra and Hidria have also signed an agreement with moped manufacturer Tomos to make Slovenia's first electronic moped. And the Automotive Cluster of Slovenia has already presented a plan to produce electric cars in Slovenia. All projects have been helped by government loans for long-term development projects in the automotive industry. In allocating the money, the government is favouring products and technologies that will reduce harmful carbon dioxide emissions and enable cost-effective energy use in vehicles.

The automotive industry may no longer have scrappage schemes from which to benefit. But, far from being concerned about stalling, companies in the sector are confidently driving forward.

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