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Romania cars: Dacia felix
April 11th 2012
FROM THE ECONOMIST INTELLIGENCE UNIT
Romania's Dacia has come a long way over the past decade, but can it drive Renault's
emerging markets expansion?
Dacia is our "brand of conquest, said Carlos Ghosn, CEO of French carmaker Renault, this
February. He was speaking in Morocco at the opening ceremony for a new assembly plant in
Tangiers that will build Dacia-branded cars for export. The subject of affectionate jokes and
ingenious repairs in the communist period, Romanias Dacia has become an international brand,
as well as a mainstay of the Romanian economy, since it was bought by Renault in 1999. Yet
whether it can now rival the achievements of Volkswagen's Skoda in penetrating emerging
markets remains in question.
Relaunched with the "C5000-car Logan Sedan in 2004, Dacia has certainly seen a rapid
transformation. The Logan was built as a low-cost, reliable and robust vehicle suitable for
consumers in emerging markets, and its development was intended to position Romania as a
heavyweight engineering and design centre within the structure of Renault. And some of that
has actually happened.
Thanks to a succession of new models, sales of vehicles made at Dacia's Mioveni factory near
Pitesi have risen from 96,300 in 2004 to 343,200 in 2011. Brisk business has been built up in
engines, gear-boxes and chassis, serving the wider needs of the Renault Group, while CKD kits
have also been good business. The second-largest engineering centre within the Group-the
3,000-strong Renault Technologie Roumanie-has been established, with a 100% Romanian-
designed vehicle launched for the first time this year. And Renault Dacia is reckoned to account
for 10-15% of Romanias exports.
Whether it has all gone quite according to plan is another matter. One thing Dacia expected but
hasnt had is a buoyant domestic market. Seriously affected by global financial crisis, Romanian
passenger car and LCV sales dropped every single year from 2008 to 2011 to less than a third
of their 2007 total, with Dacias domestic sales falling roughly proportionately to less than 10%
of total sales.
And, in terms of direct sales from Romania, Dacia has only partly played the emerging market
role first envisaged. It is in fact Western Europe that has become Miovenis primary market.
Dacia's car sales there rose to 217,200 in 2010, falling back somewhat only in 2011. Given
tough times for the motor industry in Europe, market shares rose even more impressively,
from 0.24% in 2006 to 1.67% in 2010 (falling slightly to 1.62% in 2011).
Part of this was down to the scrappage schemes, notably in Germany, where a C2,500
government subsidy represented quite a chunk out of the C7,500 price of a new Sandero
hatchback-and allowed a resurrection of the "C5,000 car slogan. More lastingly, brand
perceptions have changed. Where Dacia ranked 13
th
among car brands in a German customer
satisfaction survey by consultancy J D Power in mid-2009, it had climbed to second-equal the
following year.
By the time the scrappage schemes ended, Dacias new model, the Duster SUV, was ready to
take the baton. This allowed a move upmarket, if at a relatively low price. And in Romania-
where the Duster is now the second-best selling vehicle after the Logan-95% of customers
have gone for the most expensive version, the Laureate. The Duster has quickly taken centre
stage in Dacias overall output: launched in 2009, it represented 47% of the 343,233 vehicles
sold in 2011, with sales particularly strong in France.
By any other name..
All these numbers, however, are for Romanian-made Dacias. Yet within the Renault group,
branding has largely been a matter of expediency. Logans and the rest are sold as Dacias in
North Africa, where the Romanian carmaker has had a CKD-fed assembly operation in the
Moroccan town of Casablanca since 2005. But in Latin America, where they are produced in
Brazil and Colombia, the Logan, Sandero and Duster vehicles are branded as Renaults. In Iran,
the Logan is known as the Renault Tondar-90.
And then theres Russia. Renault has been doing rather nicely there in recent years, upping its
share in the passenger-plus-LCV market from 2.7% in 2008 to 5.8% in 2011. And 82.5% of the
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share in the passenger-plus-LCV market from 2.7% in 2008 to 5.8% in 2011. And 82.5% of the
154,700-odd vehicles it sold in the latter year were either "Renault Logans or "Renault
Sanderos produced at the 94% Renault-owned Avtoframos plant near Moscow-where Duster
production is due to start this year. With Koleos, Fluence and Megane models also in production
or due to enter it at Avtoframos, Renault is following its declared policy of "being present in all
segments.
Moreover, the Logan platform seems to be central to Renaults relationship with the ailing Lada-
maker, AvtoVAZ, in which the Renault-Nissan alliance now holds a 25% stake. The newly
developed Lada Largus, of which AvtoVAZ plans to produce 20,000 in 2012 and 70,000 a year
thereafter, will effectively be the Logan van under another name. Since AvtoVAZ, like the
communist-era Dacia, has a desperate need for modernisation as well as a huge market share
and a well-established dealer network, it seems likely that Renault will transfer much of its
know-how from Romania.
Morocco-bound
But just now, Romanian eyes are mainly on Morocco rather than Russia. Inaugurated in
February this year, the Tangiers plant was announced as long ago as 2007. Its first assembly
line-which will achieve full capacity next year-can produce 170,000 vehicles per year, while a
second line of similar capacity is planned before investments of around C1bn are completed by
2015. That makes it similar in scale to Mioveni, with production capable of going as high as
400,000 a year if weekends are worked.
Tangiers isnt an alternative to Movieni: Renault wants to operate both, using Tangiers to
introduce new models to the range (the first being the Lodgy family car recently unveiled). And
the Tangiers plant should boost Miovenis business: Romanian daily Ziarul Financiar has
estimated that it will need to export around C1 bn extra in the form of CKD kits and component
supplies. But, with Movieni operating at more or less full capacity, setting up in Morocco has
had assorted attractions compared to further expansion in Romania.
There are subsidies and tax breaks, including a special training facility paid for by the Moroccan
state. Theres a customs free-zone in which the factory is located and a developing local
components sector. There are free-trade arrangements with both the EU and various north
African states. And theres simple geography. The modern Tangier Med port is only 30km away,
handy for France and Spain, while Mioveni is disadvantaged by Romanias indifferent roads and
its underperforming port at Constanta. Finally, press reports suggest Moroccan workers will
take home around C250 per month, compared with C450 at Mioveni-and around C1,800 in
France.
Predictably, Renault unions in France are not happy, saying that Tangiers-produced vehicles will
basically be Dacia-branded Scenics and Kangoos that will eat into Renault brands market share.
And while Renaults Jean-Christoph Kugler has talked of Tangier as "the gateway to Africa, the
companys officials have actually been rather hazy about export destinations other than France
and Spain.
Mr Ghosn explained his notion of a "brand of conquest by saying that companys strategy is to
go in with Dacias in the expectation that consumers will upgrade to Renaults when they can.
West European experience suggests that some consumers are quite happy to stick with Dacias.
And, with free-trade agreements unleashing low-cost Korean brands on European markets,
Renault may find its emerging markets brand becomes all too necessary in developed markets
too.
Source: Industry Briefing
2012 The Economist Intelligence Unit Limited. All rights reserved.
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