ITM Business School, Navi Mumbai

A Project Report

A PROJECT ON “STUDY OF EUROPEAN CAR INDUSTRY” WITH MAIN FOCUS ON AUDI

Submitted by:
Submitted to Prof. B.V.R. Murty ABHISHEK JAIN (06) PRASHANT CHAUHAN (37) SAURABH BOSE (41) PANKAJ KHATRI (58)
PGDM IB

09-11

[AUDI HUNGARY]

Page 2

CERTIFICATE
I hereby declare that Mr. Abhishek Jain, Prashant Chauhan, Saurabh Bose and Pankaj Khatri (PGDM-IB), of 2009-11 batch, have successfully completed a project on “The study of European Car Market with focus on AUDI” under my supervision. I also declare that the project entitled is a secondary data research work.

……………………………………..

Prof. B.V.R Murty (Facu lty Guide) ITM Business School Navi Mumbai

[AUDI HUNGARY]

Page 3

It is done under the guidance of company attendant and my faculty guide Prof. B.R. ……………………………… Abhishek Jain Prashant Chauhan Saurabh Bose Pankaj Khatri PGDM-IB 09-11 ITM Business School Navi Mumbai [AUDI HUNGARY] Page 4 .DECLARATION To whomsoever it may concern We hereby declare that the project entitled “The study of European Car market with focus on AUDI” is based on the secondary information and the first hand information provided by the company itself.V. Murty.

Budapest). We would like to thank Prof. this project on “Study of European Car Industry” would have been far from possible. Without their guidance and persistent help. B V R Murty whose support and guidance has transcended our project to great levels. Jozsal (ESSCA.ACKNOWLEDGEMENT We would like to express my deepest gratitude and appreciation to our faculty guide Prof. Györ) who has helped us to pursue our project and whose continuous guidance and support has helped us to successfully complete the project. Olivér Gábor (AUDI. He continually and convincingly conveyed the spirit of motivation and support in regard to this project. We would also like to express our sincere gratitude to Prof. Deepthy Raghvendra for lending her support and guidance whenever we required. [AUDI HUNGARY] Page 5 . We would also like to lend our sincere gratitude to Mr.

Hungary is becoming the favorite destination for an auto manufacturing company to setup its assembly line. India is also becoming the major destinations for these giants. This research also helps us to know the major suppliers. Through this research we come to know that Europe is still ahead in the lead of manufacturing of Cars. The project was concluded with some recommendations to overcome the areas of concern and to enhance the effectiveness of the scheme. The environmental and political factors are the keys to attract the major players. Our research has find out that the organization culture of AUDI. The other main objective of this research is to understand the manufacturing assembly process of cars and the corporate culture of AUDI. [AUDI HUNGARY] Page 6 . The marketing opportunities are emerging day by day which is going to help the Indian car market. Our research is purely based on the secondary information and the first hand information available to us from the company attendant. The project was concluded with some recommendations to overcome the areas of concern and to enhance the business. The global downturn had an adverse effect on the European Automobiles. Hungary is very vibrant and sound and it is backed by German culture. It is also manufacturing only TT model. The various technologies are emerging which will helps the car makers to produce cars which are more eco-friendly.EXECUTIVE SUMMARY The objective of this research is to analyze the European Car Market and who are the major players. AUDI Hungary is the largest exporter of the engines. Hungary.

iv. vii.7 Innovation and R&D………………………………………………. References………………………………………………………………59 [AUDI HUNGARY] Page 7 .. Company Analysis………………………………………………………..44 4.23 Investment scenario in Hungary……………………………………26 Why to invest in Hungary………………………………………….33 Major Automotive suppliers in Hungary…………………………..45 5. Audi Hungary……………………………………………………. Suzuki in Hungary…………………………………………………. v. Conclusion………………………………………………………………55 7.42 AUDI TT (Sports Car division)…………………………………….. ii. vi.47 Mercedes in Hungary………………………………………………48 Recent investment in Hungary…………………………………….15 Hungarian Car Market…………………………………………….20 Reasons for the Decline……………………………………………. Literature Survey i.. European Car Market……………………………………………….50 Why India…………………………………………………………. iv. ii.. ii.... Recommendations………………………………………………………58 8. Industry Analysis i. iii.41 3. Introduction………………………………………………………………6 2. iii.. Company Profile i.CONTENTS 1.53 6.

• To understand the new technical designs. Business week. • • To understand the organizational culture of AUDI. The study is based on the collection of data from internet through e-journals. [AUDI HUNGARY] Page 8 . • To analyze the reasons for downturn in automobile market.INTRODUCTION Objectives Of The Report • • To study different car makers in Europe. Hungary. • To know the major suppliers and dealers. • • • • Hungary Autos Report. Hungarian and Indian automobile market. etc. reports. Hungarian Investment & Trade Development Agency. The Auto channel. To know the potential investment in Hungary. Research Methodology We have collected information through secondary sources of data collection. To compare the European.

• Time constraint. • There was no first hand information by the investing companies in Hungary.Limitations The research was purely based on secondary data and all the data collection was done through internet. • [AUDI HUNGARY] Page 9 .

[AUDI HUNGARY] Page 10 . Moreover. the European Community has transformed into the European Union (EU). and ACEA reports that overall EU registrations improved to 15.EUROPEAN CAR MARKET From its meager origins of only six Western European members in 1956. Romania. Over the past few years.7%. and Slovakia. the new EU members from the CEE have contributed what little growth there is in the overall European automotive market. with the arrival of the world recession. Western European demand contracted by 8. Specifically. Slovakia. by 7. as Western Europe has stagnated. Today. with the accession of 10 Central and Eastern European and Mediterranean countries (Cyprus. during 2011.8 million units. the Czech Republic. ACEA (the European Automobile Trade Association). and Slovenia). Poland. 2004. with the addition of Bulgaria and Romania in 2007. The top five CEE automotive markets in terms of sales and production are: the Czech Republic. Lithuania. with Croatia possibly joining as early as next year. Poland.7 million units. reported that overall European new passenger car registrations in 2008 recorded the sharpest decline since 1993. However.8% to 14. However. while sales in new EU Member states were down 10.4%. Hungary. Serbia. Estonia. and Croatia. it was Western European sales that fared better overall than CEE sales given the extensive national fleet renewal and scrappage schemes introduced to counter these downward trends. the sharpest decline since ACEA started reporting figures for this region in 2004. incentive programs were implemented across many of the Western European countries during 2009. which expanded again from 15 to 25 members on May 1. the EU is composed of 27 member states. In an effort to respond to this decline. Latvia. additional countries are engaged in negotiations and waiting in the wings for membership to include: Turkey. Hungary. Malta.

Production [AUDI HUNGARY] Page 11 .

[AUDI HUNGARY] Page 12 .MOTOR VEHICLE PRODUCTION IN EUROPE BY COUNTRY The graph shows the production of passenger car vehicles.

If we compare the production of passenger car vehicle of EU with the world we see that it is almost 30%. contributing significantly to economic prosperity. Total Employment Generated: The automotive sector in Europe is highly competitive. [AUDI HUNGARY] Page 13 . It supports 12 million jobs.

the automotive sector has experienced a positive trade balance of 28. or 35.1% less than from previous year.International Trade In 2009.8 bn euro worth of motor vehicles. and imported 25. This decrease is note first time in last four years due to worldwide crisis.6 billion euro. EU has exported 53. Global trade agreements that deliver free markets are most beneficial. [AUDI HUNGARY] Page 14 .2 bn euro worth of motor vehicles The global framework in which vehicle manufacturers do business is increasingly important. but this concession must be accompanied by equivalent opportunities abroad for European manufacturers. investment in resources abroad and the economic downturn at home reinforce the goal of trade without barriers. Export growth in emerging markets like China and Russia. The automotive sector fully supports the gradual dismantling of EU import duties.

[AUDI HUNGARY] Page 15 .

[AUDI HUNGARY] Page 16 .

Innovation, Research & Development
Automotive sector is the largest private investor in R&D. Every year 20 billion euros is invested by the industry that is almost 4% of its turnover. R & D develops technology that reduces the chances of road causalities and improving vehicle and environmental performance. The another step is to bring ready technologies to market cause it takes a long time to make R&D potential a reality.

[AUDI HUNGARY]

Page 17

New Technologies
Safety

The new technical advancement is made in the direction of Cooperative systems based on vehicle-to-vehicle and vehicle-to-infrastructure communication. This is done to improve the safety on the roads.

Energy and Environment

[AUDI HUNGARY]

Page 18

A total of 15,244,416 cars are produced in the year 2009. Overall, Europe is dominated by European manufacturers based throughout the continent. The largest foreign companies are Ford, Toyota, and Opel (which was owned by GM in 2008). The European market starkly contrasts the US auto industry with over 80% of sales being cars, and the cars are generally much smaller than the ones preferred by the US consumer. Europe is also much more diverse in their number of auto companies, where most auto companies have single digit market share. This mix prevents any single company from suffering the losses of the US companies and the steady
[AUDI HUNGARY] Page 19

Magna will be new to selling and designing new cars but is very familiar to manufacturing them. Below is a brief description of Europe’s auto market by manufacturer: Data as of January 2009: %Market Share VW: Ford: Opel: Renault: Peugeot: Fiat: Citroen: Toyota: 10.5 6. Opel had been struggle years before the economic crisis and had overcapacity and disagreements with unions in Germany.7 8.3 7.5 5.1 -14 -8.8 -9 -2 -9.8 5.consumer preference for cars allowed most companies to remain competitive. Opel is expected to be reorganized under the new ownership to increase profitability.8 Source: Eurostat 2009 [AUDI HUNGARY] Page 20 .2 -11.9 7. It is yet to be seen how Magna will use the new Opel unit and its effect on the European market.3 % Change -3. In the last three months Opel has been sold to European based Magna company.8 -4.8 6.

5%) and the structure of export showed a favourable trend: after 1998 the share of technologyintensive and high value added sectors such as machinery. Its per capita GDP is EUR 15.700/ USD 20. EIU). coal. wiiw. arable land. It is a rich country in terms of natural resources like bauxite. transportation equipments. fertile soils. EIU) having its composition as EUR 15. and ICT products grew significantly. strategic location astride main land routes between Western Europe and Balkan Peninsula as well as between Ukraine and Mediterranean basin. natural gas.230 (2008.230 (2008. Between 2001 and 2008 export growth was exceptionally high (11. It is a landlocked country. wiiw.HUNGARY Hungary is one of central eastern European country having its official name as republic of Hungary. [AUDI HUNGARY] Page 21 . Its widespread over the area of 93030km2. GDP growth in Hungary has been driven by the expansion of export and investments.700/ USD 20.

have set up production facilities in Hungary. a figure that stands at 88 per cent for engine and component production. Of these enterprises. several foreign car manufacturers. The number of first. But currently. Audi and General Motors.2 billion and engines accounted for EUR 5. Since the early 1990s. as well as 14 of the top 20 Tier 1 suppliers. such as Suzuki. The export ratio of Hungarian made cars is 94 per cent. Over 600 companies employing a total of 100.3 billion. and is expected to persist through the rest of the 2009 as a widespread contraction in Hungary’s economy. vehicle sales outside Hungary were worth EUR 8. New car sales in Hungary fell by nearly [AUDI HUNGARY] Page 22 . a steep downward trend in auto sales and production was happening in Hungary. 240 operate according to the ISO and/or TS 16949 quality management standards. similar to US and Europe automobile market. In 2007.and second-tier equipment manufacturers is continually rising.HUNGARIAN CAR MARKET The automotive sector is one of Hungary's core industries and contributes 20 per cent of total exports.000 people are active in the sector.

5 working days basis. German parts supplier [AUDI HUNGARY] Page 23 . moved to a four-day week from mid-April at its engine and transmissions manufacturing plant in Szentgotthard.372 units at the first quarter. resulting in the loss of 1. which relies on export-driven growth. many suppliers still see Hungary as an attractive location for investment over the long term.7% year-on-year to 26. total sales of light commercial vehicles (LCVs) dropped by 30. compared to this dull trend. The automaker made similar production cuts during the Christmas holiday in 2008 and then again in February. General Motors Powertrain (GM Powertrain). In the quarter of 2009.000 units in 2008. according to the Association des Constructeurs Européens d' Automobiles (ACEA).New car sales in Hungary fell by 33. although later that month.000 units in 2009. Suzuki Motor’s Hungarian plant has operated on a two-shift.200 workers.46% year-on-year (y-o-y) to 7.164 units in February 2009.1% y-o-y. To react to the hard situation. while the group's earlier forecast had been for sales to fall to 120. However. Since January 2009. according to the ACEA. the plant' s CEO said that the cutback could be temporary.000 units. which is compared to 282. The chairman of the Hungarian Car Importers Association (MGE) has said that new vehicle sales could plunge by nearly 50% this year to 85. the Hungarian subsidiary of US group General Motors (GM). The commercial vehicle segment is also feeling the effects of the sliming economy as business cut back on purchasing new company cars. The market leader. Germany’s Audi shut car production and scaled back engine production at its Gyor plant before and after the Easter holiday in April. with further plans to close the plant for three weeks in August. expects production to fall to 210. manufactures are making cost-cutting moves and slowing down operations at their facilities.000 units.000-90.

Generally. not reaching 2007 levers until 2013. Part of the reason can be traced back to the special feature of Hungary automotive investment market that the investment has been concentrated in automobile component production. With some economic recovery expected in H210. ContiTech Fluid Automotive Hungary.5%y-o-y in 2010. Here below are the figures of new passenger car registration in Hungary: [AUDI HUNGARY] Page 24 . the extruder lines and assembling machines at its plants in Makó and Vac. will be reportedly investing nearly EUR5 million for the installation of vulcanizing furnaces. On the whole the passenger car market is set for slow recovery. e. while the assembly and manufacture of cars has played a secondary role. The form of this feature is influenced by many factors.Continental is looking to move one of its production units from Spain to Hungary.g. the supplier’s fluid technology division in the country. growing by a negligible 0. the price of labor is relatively low in Hungary compared to other countries. the car sales are expected to fall by at least 8% y-o-y in 2009. the forecasted car sales to end that year is at almost the same level as 2009. according to the Hungary Autos report Q2 2009.

the recession started in December 2007 in the United States so the entire year was plagued by a shrinking economy and poor consumer confidence. Barrels of crude oil nearly doubled within 6 months in 2008 from 70 USD to 140 USD and caused petrol prices to double as well. so the explanation must be more than the general economy. Unemployment rates started to rise in the beginning of the year and the housing market was in dire straights for a year already. The high petrol prices caused consumers to stop buying trucks and SUVs because their poor petrol efficiency and some opted to purchasing a car instead. The high petrol prices are the cause for [AUDI HUNGARY] Page 25 . Some consumers that were put off by the high petrol prices opted not to buy in hopes for cheaper petrol prices and delayed a purchase for another year. The US auto market was considered to have two difficult obstacles to overcome in 2008. The US market suffered deeper declines of 18% compared to Europe’s 7%. These are key indicators to new cars sales because individuals in America use home equity loans to purchase cars and individuals cannot obtain the credit needed to buy a car if they are not employed.REASONS FOR THE DECLINE The exploration of the US and European market show that the declines are much more localized than general global recession. First. The second incident causing the decline of US auto sales was the rapid rise in petrol prices in the spring and summer months.

like the UK. There are significant risk factors: falling domestic demand. whom had the smallest decline in Europe. and decline in overall industry sales. The US government has not done much action to stimulate the auto industry for consumers. Germany was hit hard by the recession but strong government action stimulated the consumers to purchase new cars. did not enter the recession until the last month of 2008 and explains why sales remained fairly stable. loss of US manufacturers market share in 2008. While growth is contracting across Europe. This is evident in the disparities in the change in auto sales according to country. the [AUDI HUNGARY] Page 26 . Hungary's recession is expected to be particularly deep. The countries that saw the largest decline. only amounts to be around 200 or 300 USD in savings for the consumer and will not be realized till the taxes are filed in the first half of 2010. Their program involved consumers turning in old fuel inefficient cars and receiving government credit worth a few thousand euros for a new car.increase in car sales. were the countries that were hardest hit the recession with high unemployment and housing declines. The government has performed several emergency loans to help GM and Chrysler to remain in businesses and several divisions have been sold off. Europe’s decline can be mostly explained by the global recession. declining GDP growth. Hungary is facing its most trying economic challenge since its postcommunist transition of the early 1990s. France. In the stimulus package passed by the Obama administration in February 2009 the federal government allowed taxes paid on the purchase of new vehicles to be deductible. This however.

government austerity measures. which is pulling down domestic sales. falling export demand is forcing manufactures to scale back production and dismiss workers. rising unemployment. consumers are tightening their wallets. [AUDI HUNGARY] Page 27 . The scrap page plans announced by several European governments may also provide short-term support for exports.sliding value of the forint. Hungarian auto sector is being hit on two fronts: on the one hand. output should begin to rise. On the other hand. Compared to Europe. New car sales in Hungary show a strong correlation with economic growth and with the change in disposable income of the population. So the global economic downturn has dried up demand for autos both at home and in key export markets in Western Europe. Once the global economy picks up again. especially in the Europe.

FDI nflow data in 2008 do not show the effect of the global economic crisis yet. FDI stock per capita in the CEE region. 2008 [AUDI HUNGARY] Page 28 .INVESTMENT IN HUNGARY FDI Since the beginning of the transition to democratic market economy at the end of the 1980s. can currently boast of having attracted Foreign Direct Investment (FDI) of more than 60 billion Euros to date which represents the highest per capita rate in the Central-Eastern European region. well-balanced across the various sectors of the economy. a country of 10 million inhabitants. Hungary has attracted a steady stream of foreign capital. Hungary.

2009 In the early 1990s.although even then investments in new industrial facilities were becoming increasingly frequent. research and development. market-based privatization. biotechnology. Analysis and forecasts. Foreign direct investment (FDI) has been crucial in boosting economic performance and remains the driving force behind Hungary's economic success. ICT. shared services operations and logistics has become [AUDI HUNGARY] Page 29 . was the main incentive for foreign investment . Hungary has been focusing more intensively on the introduction of advanced technologies and innovation into production of goods representing higher added value. A new structure for Foreign Direct Investment (FDI) While privatisation is still in progress in other central European countries. fuelling its strong export growth and significantly increasing productivity.Source: wiiw. a unique phenomenon in the region at that time. Investment in the automotive sector.

in the late 1990s. Also.especially important. Today FDI spreads more evenly among sectors in Hungary than in other countries in the region. however. Source: Hungarian National Bank. not only have a number of the largest multinational manufacturers and service providers established their facilities in Hungary. 2009 [AUDI HUNGARY] Page 30 .000 companies operating with foreign participation in Hungary. FDI Stock in Hungary by Sectors Nearly half of foreign investments in Hungary have been cumulated in the manufacturing sector. Today. their major international suppliers have also come and brought along their subcontractors with them. Currently there are more than 30. Since 1995. as other Visegrád countries opened up their markets and started privatisation Hungary had to face more competition in the manufacturing sector. services have gained grounds as well. partly because privatization in the services sector started later than in the manufacturing sector. At the beginning of the 1990's manufacturing was the main target of all investments.

3% 6% 5% 3% 3% 2% 2% 1% [AUDI HUNGARY] Page 31 . Analysis and forecasts. 2009 20% 11% 12.Distribution of FDI by the most important sectors Real estate and business services: Transportation equipment: Financial services: Electronics: Energy and water: Food: Metals: Chemicals and pharmaceuticals: Machinery: Plastic and rubber: Source: wiiw.

The United States has been the largest non-European investor (5%) and in many cases the investments going through the Netherlands and other European countries also originate from the US. Among the Asian countries Japan and SouthKorea have played an increasing role in FDI. Geographical proximity and historical links explain the dominance of the European investors. [AUDI HUNGARY] Page 32 . followed by the Netherlands (14%) and Austria (13%).FDI Stock by Countries of Origin Like in other CEE countries. Germany is by far the most important country of origin with 25% of all FDI. foreign investors from the EU-15 countries have accounted for the majority of investments (79%) in Hungary (Hungarian National Bank. 2009).

in 2008. in 2009 and 2010 FDI inflow is expected to fall to EUR 1. a figure that stands at 88 per cent for engine and component production. 2009). Over 600 companies employing a total of 100. however. experts forecast a recovery in 2011. In 2007.3 billion. The new EU-12 region is likely to keep its favourable position as an investment destination and Hungary may again receive an annual average of EUR 3.000 people are active in the sector. wiiw.5 billion in Hungary (EIU. vehicle sales outside Hungary were worth EUR 8.5-2.Source: Hungarian National Bank. and reached EUR 4. FDI inflow to Hungary did not decrease compared to 2007. AUTOMOTIVE SECTOR The automotive sector is one of Hungary's core industries and contributes 20 per cent of total exports. 290.235 passenger [AUDI HUNGARY] Page 33 . In the year 2007. 2009). 240 operate according to the ISO and/or TS 16949 quality management standards.4 billion (Hungarian National Bank. The export ratio of Hungarian made cars is 94 per cent. Of these enterprises. 2009 Contrary to expectations. However.2 billion and engines accounted for EUR 5.5-4 billion FDI in the medium term. 2008. In line with global trends. There are total 630 automotive companies in hungary out of which 290 have quality certificates.

as well as 14 of the top 20 Tier 1 suppliers.000 motor cycles wer manufactured. Audi and General Motors. 5. Major Hungarian scientific and technical contributions include: [AUDI HUNGARY] Page 34 . flexible and qualified labour pool at competitive costs Central location . several foreign car manufacturers. WHY TO INVEST IN HUNGARIAN AUTOMOTIVE SECTOR • • Tradition of innovation Access to a talented. Hungary has been a large contributor in terms of science and technology.045 commercial vehicles and buses and 50. Since the early 1990s. The hungarian automotive industry recently celebrated its centennial in year 2006. such as Suzuki. have set up production facilities in Hungary.and second-tier equipment manufacturers is continually rising.a possible hub for Europe Excellent local supplier network Major automotive suppliers in Hungary • • • Tradition of innovation Innovation has always been a tradition for hungarians.cars. creative. The number of first.

Gyula Cser organizer of Ford-T's mass production (1905-15) . creative.Dr.Ferenc Anisits safety concept of vehicles (1939-1972) . Ányos Jedlik carburettor (1890) .József Galamb o o o o Access to a talented.o o o electrical engine (1828) . flexible and qualified labour pool at competitive costs Hungarian automotive industry consists of 100.Ferenc Pavlics BMW diesel engine development (1981–1999) .000 employees which are well trained and educated.János Csonka and Donát Bánki NASA's Moon Rover and Mars vehicles (1961–1988) .Béla Barényi combined engine charger system (1968) . Major cities provied world class training and Universities in Hungary educating engineers: [AUDI HUNGARY] Page 35 .

To go by the composition. [AUDI HUNGARY] Page 36 .productivity level is still high. 10% electrical engineers. Over 50% are mechanical engineers. Though the wages are lower as compared to western europe. production. 11% information-systems engineers. quality assurance and sales. while the rest are active in technological development. 9% automotive engineers and 39 % quality-assurance engineers and chemical engineers out of which Nearly 20% of engineers are engaged in product-improvement.

technical or vocational education. and sciences. highly motivated and very efficient.2 million is highly educated and highly skilled. particularly in the financial and marketing sectors. medicine. About two-thirds of the employed population has completed some form of secondary. economics. East of the Danube unemployment levels are usually [AUDI HUNGARY] Page 37 . Foreign employers find Hungarian workers extremely flexible. Hungary has great traditions and high standards in many areas including engineering. Employment within Hungary varies regionally: in the North-West temporary shortages of skilled workers occur.Labour Market Hungary’s labour force of about 4. Most of young Hungarians speak English and/or other Western languages.

An employment agreement may not contradict the Labour Code or any collective agreement in force. The basic elements of employment agreements are regulated by the Hungarian Labour Code (Act XXII of 1992). The duration of the vacation is 20 days. and may be terminated by mutual consent of the parties.higher than the national average. Each employee is entitled to a regular vacation every calendar year.g. Employees cannot be obliged to work on public holidays.Social security contributions are mandatory for Hungarian employees. employees not otherwise subject to but wishing to benefit from the Hungarian social security system may still be allowed to contribute. which is broadly similar to employment law in other European Union countries. The pension system is now a three pillar system of a mandatory public scheme a private scheme and a voluntary scheme.. The terms of employment are established by a written labour contract. but the number of vacation days is increased according to the age of the employee. works councils). sometimes exceeding 10-15%. Current rate of the employer’s contribution: [AUDI HUNGARY] Page 38 . The normal daily working time is eight hours. An employment agreement can provide more benefits for the employee than those required by the Labour Code or a collective agreement. The Law provides a basis for organized labour negotiations with trade unions or other representatives of employees (e. weekly working time is maximum 48 hours with 2-day rest period.

an optional hub for Europe Hungary has a location which is just perfect and makes it a optimal hub for europe.– 24% pension insurance – 5% health insurance – 1. it has got a potential logistics and production base and hence has got direct access to balkans and eastern europe Infrastructure and Transport Hungary's central location in Europe and the dense motorway network is one of its most important competitive advantages. providing unparalleled access to all parts of Europe.5% training contribution As of January 2009. Central location . the minimum gross monthly wage is HUF 71. Due to its favourale geographical position in europe. but also to enhance its infrastructural network and to improve its integration into the European network [AUDI HUNGARY] Page 39 .950 HUF/month health care contribution – 3% unemployment insurance premium – 1.500 = about 247 €. Four vital European transport corridors pass through Hungary. Hungary is determined not only to preserve. including major European ports and the fast-growing CIS market In order to exploit these benefits.

70 % of the road traffic is passing through the motorways and main roads of the country. Hungary has an extensive road system.. ensuring faster and safe transportation. The improvement of the highway network and four-lane motorways linking all the major cities in Hungary will result in an approximately 40% decrease of driving times on the main inter-city routes. The length of the country's expressway network is 1. running clockwise from the Vienna motorway M1) and all of them [AUDI HUNGARY] Page 40 .110 km. Seven of the eight main roads start from Budapest (designated by single digit numbers. and the most developed highway network among new EU member states. Road Network As a result of intensive construction works along main transport corridors. major motorways and trunk roads reach national borders. centred in Budapest.

Excellent local supplier network Hungary . A top priority of the Hungarian government is to further extend and reconstruct the road network in Hungary. [AUDI HUNGARY] Page 41 .as one of the “Detroit East” countries .can supply manufacturers and customers in the whole of Europe.link up with the European road network. The number of orders are on an increasing scale due to heavy investments by CBU manufacturers to expand.

Arvin Meritor. DENSO and ZF. A3 cabriolet) DAIMER: 100.Temic Telefunken. Continental.Several multinationals have set up R&D centres in Hungary including Audi.253 cars assembled in 2007.MAJOR AUTOMOTIVE SUPPLIERS IN HUNGARY Prior to the global crisis manufacturers. Bosch. ThyssenKrupp. WET. Magna-Steyr.000 pcs in 2008 AUDI: 56. Visteon. Edag. Draxlmaier.982 cars assembled in 2007( TT coupe.14 of the world’s top 20 TIER-1s have already established operations in Hungary . CAR MANUFACTURING AND ASSEMBLY SUZUKI: 233. 300. Denso. such as Suzuki and Audi were steadily expanding capacities and workforce to meet growing demand.000 mercedes A and B class planned for 2011 [AUDI HUNGARY] Page 42 . In 2007/2008 two of the top awards presented by the Minister of National Development and Economy to most outstanding foreign investors was received by Daimler AG for its new investment in Kecskemét. Knorr-Bremse.

913 million engines produced in 2007.5 % increase on 2006) • New TT model introduced in 2006.3 billion in Hungary. six.913 million engines produced. and is planning to invest 200-250 mn EUR per year is planned until 2011 • Audi Hungária is going to manufacture the 10-cylinder.87 billion (16.7% increase on 2006) • Hungary’s largest exporter • Employs 5. sq meter area • Since 1993 Audi has invested a total of EUR 3. The new engine plant was officially opened less than [AUDI HUNGARY] Page 43 . innovative engine models introduced • 56. 15 new.(379 variants of 24 different types of powertrain) GM POWERTRAIN: 434. 560 HP engine for the luxurious sports car Lamborghini Gallardo AUDI AG chose the Hungarian city of Györ as its new production location in November 1992.845 people • 24 different engines in 379 variants of four-.ENGINE MANUFACTURING AUDI: 1.617 engines produced in 2007 AUDI IN HUNGARY • In 2007 1.982 cars assembled (41.and eight-cylinder engines for the VW concern in a 375 th. new A3 cabriolet introduced in 2007 • Turnover in 2007: EUR 5.

in the year 2009. its progress right up to recycling is monitored. Production of Audi TT models in Hungary commenced in April 1998.000 of the Audi TT Coupé and Audi TT Roadster have left the assembly lines in Györ. permitting the flexible delivery and collection of production components and engines. following the methodology of IFRS 49 (2008 in: 54) million euros for research and development expenditure has been activated.two years later. Audi Hungaria Motor Ltd. [AUDI HUNGARY] Page 44 .. Almost the entire range of Audi engines is now produced in Györ. The parts for the engine assembly process are delivered in returnable containers. Audi has access to a good supply of skilled workers and highly qualified graduates from the Institute of Technology. Wherever waste does occur.900 was employed there at the start of 2001. A closed cooling and lubricating circuit guarantee effluent-free production. and 40% of thermal energy is recovered. Final assembly of the Audi A3 commenced there in April 2001. Modern recycling management avoids unnecessary waste. The Györ site is a dutyfree area. More than 145. Environmental protection is likewise practiced in an exemplary manner in Györ. Dust and oil are removed from the exhaust air from the machine rooms. A workforce of around 4.

a total of 32.AUDI TT The Audi TT is a sports car manufactured by German automaker AUDI AG since 1998 in Györ. The total number of items within the 18.010 (in 2008:31. Mays and Freeman Thomas. The TT was first shown as a concept car at the 1995 Frankfurt Motor Show. In the last financial year.603 motor vehicles (2008:60. TT also delayed its introduction. A previously unused laser welding adaptation which enabled seamless design features on the first-generation. with Martin Smith and Romulus Rost contributing to the award winning interior design. Audi did not initially offer an automatic transmission option for the TT. It is now in its second generation –and available as 2+2 coupe or two-seater roadster. Hungary. The design is credited to J. A direct-shift Gearbox (DSG) became available. the first for a production car. 4811 [AUDI HUNGARY] Page 45 . in 2003.359) wipes production have not reached the previous year's level.101) Audi TT Coupe. The development of the Audi TT began in September 1994 at the Audi Design Center in California.

Suppliers 5. Potential Entrants 2. PORTER’S MODEL FOR AUDI HUNGARY 1. Buyers [AUDI HUNGARY] Page 46 . Existing industry Competitors 3.570) Audi A3 Cabriolet made.688) Audi TT Roadster and Audi AG on behalf of 9782 (2008: 18.(2008: 10.

4. 2. Jaguar etc are penetrating into the Hungarian market. Nissan. Substitutes 1. Aston Martin. Bargaining power of Buyers: (Medium) The AUDI cars are highly customized so buyers cannot influence the price and so price is not the important factors when it comes to luxury cars. 4. 3. Bargaining power of suppliers: (Strong) The numbers of supplier are more and easily available so bargaining power of the supplier is high. Potential Entrants: (Strong) Many players like Ferrari. the kind of experience of owning these luxurious cars. Threat of substitutes: (Low) While there is possible competition from lower segments cars. [AUDI HUNGARY] Page 47 . charted planes and sport bikes but nothing can give customers.

But there are so many players in Europe so competition is too high. SUZUKI IN HUNGARY • 1991 – Foundation of Suzuki Hungary in Esztergom on a 35. Wagon R+) [AUDI HUNGARY] Page 48 . but in India still it is untapped. Rivalry among competitors: (Strong) The luxury car in the Europe has become very competitive.000th Hungarian-made Suzuki • 2000 – Wagon R+ launched • 2003 – Introduction of Ignis • 2004 . SX4. 146.3 million was reached • 2006 .production of new SUV the SX4 launched • Number of employees: 6.200 • Production in 2007: 233.000 m2 plot • 1992 – Serial production Swift models • 1999 – The 250. (Swift. Ignis.5.870 cars were manufactured.262.Awarded for the biggest reinvestment (EUR 100 million) by the Prime Minister • 2005 – new Swift. record turnover of EUR 1.253 cars.

000 Units.• By having invested EUR 199. The family of compact cars will be built at a new plant in Kecskemét.24 billion) to establish and will create some 2. "We are planning a new plant in Hungary to boost our competitiveness and [AUDI HUNGARY] Page 49 .27 bn • Production of the Splash started in February 2008 (planned production: 60. cabriolet. Hungary. MPV and soft-roader.500 jobs.44 mn in 2007 total volume of investments reached EUR 1. Moving to a plant in Hungary will allow Mercedes to manufacture the cars at a lower cost than if they were produced in Germany. The new plant will cost more than €800 million ($1. MERCEDES IN HUNGARY Mercedes-Benz will release four new compact cars to replace the current A and B-Class models when they reach the end of their product cycles in 2010/11. and the fact that it’s a new plant means the build process should be efficient thanks to latest construction techniques. and will likely include a coupe.000 per annum) • Production planned for 2008: 300.

and plans to invest €600 million ($928 million) to increase capacity for more small cars. The new family of small cars is designed to help Mercedes meet tougher fuel-consumption and emissions regulations as well as providing it with a range of exciting compact models to launch in North America. possibly even lower than the BMW 1-series and Audi A3. They will also drop the expensive 'sandwich' design of the current A and BClass in favor of a new MFA (Mercedes Frontwheel Architecture) FWD platform.to gain access to potential of the Eastern European markets. although such an export program is yet to be confirmed." . and will also be much sportier. This means the new cars will sit much lower than current models. WHY DID MERCEDES CHOSE HUNGARY? • • • • Good location and developed infrastructure Good quality of labour A large network of automotive suppliers are already present Professional services [AUDI HUNGARY] Page 50 .Daimler CEO Dieter Zetsche Mercedes hasn’t forgotten its Rastatt plant back in Germany.

BOSCH Bosch Budapest Development Centre has been expanded by 120 new engineers in 2008.500 jobs and production is to start in 2012. The 800 million investment will create 2. and by now already 430 engineers work in the development [AUDI HUNGARY] Page 51 . Central Hungary. The Hungarian Government supports the investment of Daimler with a package of measures giving the project a clear prioritization.RECENT INVESTMENTS DAIMLER Daimler has decided to assemble its A class and B class Mercedes Benz cars in Kecskemét. Research activities in Budapest have started in 1999 with a few engineers.

centre. Bosch has spent 36 million EUR on R&D in Hungary last year. The overall cost of investment will reach EUR 11 million. The company is cooperating with several education institutes like the Budapest Technical College with whom the development of an intelligent small car is underway. F.Segura has chosen the city of Szolnok to establish a new facility to design and manufacture metal components for the automotive industry. KNORR-BREMSE BRAKE SYSTEMS [AUDI HUNGARY] Page 52 . From this privileged position in the centre of Europe and bordering on seven countries.SEGURA Spanish Grupo F. F. which means a one and a half growth within one year. Initially the factory will be 11. over a total area of 10 hectares.Segura Hungaria KFT wants to obtain a major presence in the current and future European context.000 sqm large. With this strategic decision F.Segura establishes itself in a multi-customer environment where privileged logistics conditions and additional benefits take profit of the new emergence markets in the region.

[AUDI HUNGARY] Page 53 . Knorr Bremse has established its development centre in 1999 in Hungary. Hungary to manufacture body parts for the vehicle industry. AUDI Audi Hungaria has long been a significant automotive company in Hungary and it is one of the largest exporters.GEDIA Gebrüder Dingerkus GmbH develops and manufactures pressings and welded assemblies for the automotive industry. Audi TT sportcars and Audi A3 Cabriolets are only assembled in Gyor. GEDIA The GEDIA Group .Knorr-Bremse Brake Systems Kft. The Hungarian branch has the most employees among the European factories. In the last 15 years more than fifteen million engines have been manufactured. announced that it will invest more than EUR 10 million in a research and development (R&D) project in Hungary which will employ 60 engineers. The company announced that it will create 103 new jobs and an investment of EUR 21 million in Tata. technical products and fastening systems for the household goods industry. The Knorr-Bremse Group is the world's leading manufacturer of braking systems for rail and commercial vehicles.

AUDI HUNGARIA MOTOR Kft. Globally competitive Auto Ancillary Industry and established automobile testing and R&D centers. 2nd largest two-wheeler market 11th largest Passenger Cars producers 4th largest in Heavy Trucks 2nd largest tractor manufacturer The monthly sales of passenger cars in India exceed 100. As for vehicle assembly. alltogether 60 thousand cars have been assembled.5 lakh of direct employment and about one crore of indirect employment. WHY INDIA: The economy of India is emerging. The automotive sector is one of the key segments of the economy which contributes about 4 per cent in India's Gross Domestic Product (GDP) and 5% of Industrial production. This sector has generated about 4. Last year more than 1.333 engines have been manufactured in Gyor. In the year 2009-10 the Despite economic slowdown production and exports [AUDI HUNGARY] Page 54 . The Hungarian branch has invested EUR 309 million in 2008. 9th largest automobile industry.900. production volume has grown by 6% last year. too. has closed a successful year in 2008.000 units.

and underlined that the industry employs over one crore people.of the sector went up last fiscal. grew at a CAGR of 15 per cent. This liberalization has helped this sector to restructure itself.8 per cent over the last six years to reach 1. contributing to 78 per cent of volumes.83 millions. 100 percent Foreign Direct Investment (FDI) is permissible. Growth of Passenger Vehicle Segment The domestic Passenger vehicles market has grown at a 14. absorb newer technologies. Overall automobile production went up by 3 per cent to reach 1.11-crore. Government Support in India Automobile production from 5. Indian Passenger Vehicle Market in 2008-09 Company Name Suzuki Tata Hyundai Toyota Honda GM Ford Others Market Share 52% 17% 19% 1% 5% 2% 2% 6% The total production of passenger car in India is 1. exports increased by over 23 per cent to over 15-lakh and domestic turnover of the sector stood at Rs. The remaining share is with utility vehicles and sports vehicles.8 Million Units in 2007-08. [AUDI HUNGARY] Page 55 .3 Million Units in 2001-02 to 10. and keep pace with the global developments realizing its full potential.5 million units in 2007-08. 2.Passenger cars.19-lakh crore. said the Economic Survey 2008-09.

Turnover of the Indian auto component industry is forecasted to surpass US$ 50 Billion in 2014-15. in Mumbai. Ltd. Audi set up its own sales company for India. Audi is represented in 110 countries worldwide and since 2004. Motorcycle sales will exceed 10 Million units by 2012-13. Audi is one of the world’s leading premium brands and is among the most admired on the world market. At present. [AUDI HUNGARY] Page 56 . Audi’s goal is to become the leading automobile luxury brand in the Indian market in the next few years.Future prospect of Indian Automotive Sector Future prospect of Indian Automotive Sector is looking bright. Value of auto component exports is likely to attain a double digit figure in 2012-13. AUDI IN INDIA As a manufacturer of high-quality and innovative luxury cars. Audi is making a clear long-term statement in the country with ambitious growths plans. The Audi India strategy encompasses significant investments in branding. Audi has been selling its products on the Indian market. By establishing Audi India as a Division of Volkswagen Group Sales India Pvt. Sales of passenger cars during 2008-09 to 2015-16 are expected to grow at a CAGR of around 10%. Audi is assembling the Audi A6 and the Audi A4 for the Indian market in Aurangabad. Passenger car production in India is projected to cross three million units in 2014-15. marketing. exclusive dealerships and after sales service for the upcoming years. In March 2007. The basis of its success comprises pioneering concepts in the domains of advanced technology and design.

[AUDI HUNGARY] Page 57 .

Hungary with highly innovative tradition. and strong supplier network can prove to be an important hub for automobile companies. [AUDI HUNGARY] Page 58 . With high FDI. With India market being dominated by Indian and Japanese manufacturers. skilled labor. Hungary serves automobile industry as its core business. it opens a new door for Hungary to development. With the global downturn in automobile market it has been analyzed that European market has also shown the signs of market slimming. Raba. With Mercedes entering Hungary in 2010. An open door for competition is also invoked and many more companies might also like to join the campaign. India is a big market for small cars whereas Europe has an affinity towards luxury cars. Suzuki. European automobile market decline is not that steep and countries like France and Germany has shown a fall of less than 2%.CONCLUSION Europe and India has always been a great interest for automobile companies. etc. Europe was always an interest for local manufacturers. Hungary being central location of Europe serves as hub for many sectors. Many companies have been investing in Hungary like Audi.

even though the number is small. some kind of extra benefits should be awarded on the basis of performance. Audi should provide the facility of parking in their premises for their loyal customers. To motivate the employees and workers. people from the remote places of India are also buying luxury cars. It is not that Audi has the potential customers only in Tier 1 and Tier 2 cities. Audi should launch more sports cars or coupe/roadsters in Asian Market as the number of young people is more and youths mostly prefer Coupe/Roadster. It should also carry out joint marketing activities with their exclusive dealer. Audi should starts hiring the employees from other than Hungary and Germany so that organization culture will be more diversified in the global perspective. Audi should start the manufacturing of other sports model because AUDI Hungary is becoming the most important automobile hub.RECOMMENDATIONS  Audi should conduct mass potential activity when it is entering in a new market like India.      [AUDI HUNGARY] Page 59 . Besides TT model.

wikipedia.org/wiki/Automotive_industry European Automobile Manufacturers Association.siamindia.pdf Audinews.). from www. 2010.be: http://www.d.).).org: http://en. Retrieved June 12.REFERENCES  wikipedia. 2010.d.com/2010/01/29/mercedes-benz-vanscontinues-to-gain-market-share/ European Automobile Manufacturers Association.siamindia. (n. (n. from www.siamindia.acea. (n.com: http://europeanmotornews. 2010.be: http://www.europeanmotornes. Retrieved June 12. 2010. 2010. from www.com/news/08/audi-market-share/ Europeanmotornews.audiworld.audiworld. Retrieved June 12.com: http://www.).d.acea.be/index. 2010. (n.aspx Society of Indian Automobile Manufacturers.).acea.com: http://www. from www.com/scripts/production-trend. Retrieved June 13. from www.d.aspx       [AUDI HUNGARY] Page 60 . Retrieved June 13. (n.d.d.).acea. 2010.com/scripts/market-share. Retrieved June 12. (n.siamindia. from www.).d.php/news/news_detail/employment/ Society of Indian Automobile Manufacturers. Retrieved June 12. from www. (n.be/images/uploads/files/20091223_ACEA_PRPCCalendar_2010-public.com: http://www.wikipedia.

Master your semester with Scribd & The New York Times

Special offer for students: Only $4.99/month.

Master your semester with Scribd & The New York Times

Cancel anytime.