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Market of passenger cars and auto parts and accessories in Romania (July 2012) 1. Domestic demand in Romania 1. 1. Domestic consumption of cars The country has 22.2 million people, and is one of the larger CEE countries in terms of the population. Moreover, the rate of car ownership is one of the lowest in CEE with 247 cars per 1,000 people The total stock of passenger cars in Romania increased continuously from 1.6 millions in 1992 to 4.3 millions in 2011 of which 25% of cars older than 20 years, 45% of cars older than 15 years, Romania became the average age of cars in Europe, "most" countries. The Romanian car market dropped by 7.4 per cent last year (2011, a number of 110,668 units were sold, including vehicles for personal use and commercial vehicles, which is down from 119,576 units in 2010. Sales of cars dropped by 11 per cent, from 106,328 units sold in 2010 to 94,624 sold last year. In the last four years, the vehicle market dropped by 70 per cent in Romania, due to the economic crisis. In 2011, Romania exported 304,924 vehicles, which is 3.1 per cent less than the previous year, while imports dropped by 3.7 per cent, to 79,761 cars. Top 10 best selling car marques in Romania: 2011 market share, % Dacia 28,337 (29.9% ); Volkswagen 10,043 (10.6%); Skoda 8,260 (8.7%); Renault 7,229 ( 7.6%); Ford 5,547 (5.9%); Opel 4,872 5.1%; Hyundai 3,405 3.6%; Chevrolet 3,027 3.2%, Toyota 2,902 3.1% ; Peugeot 2,425 2.6% Nearly half of the sales were through a car renewal programme* launched by the government.
* Romanian government launched a revised clunkers program in February, 2010 in which car owners received a voucher in exchange for each scrapped car, which could be combined with up to three others when buying a new car. By December 2010, this program has induced the sale of 60 000 new cars out of a total of 106,000 cars sold in 2010 (roughly 57 % of sales). Overall, more than 50% of the Romanian vehicle population does not conform to the European emission standards.

Sales of market leader Dacia in 2011: Logan Sedan (15830 units), Logan Duster sports (7252 unit), Sandero hatchback and Logan Multi Convivial( 3000 2255 units.) Despite expecting more promising growth in the sector in 2012, as economic improvements begin to filter through to consumers, we believe it is unlikely that Romanian car sales will return to pre-crisis levels by the end of our forecast period in 2016.

The Association of Car Manufacturers and Importers estimates a slight increase in the Romanian market of new vehicles in 2012 as compared to the previous year, up to 100,000 units. Unit: USD millions Car (motor vehicles market) Total market size Total local production Total exports Total Imports

2009 1.980 3.328 2.570 1.634

2010 2.040 3.788 2.760 1.733

2011 (estimated) 2.252 3.968 3.200 1.920

1. 2. Consumption of auto parts and accessories Romania is one of the smaller EU markets for parts and components, but it is growing rapidly. It is one of the few countries to see consumption grow above 2008 levels again. Total consumption of parts and components in 2010, as derived from Prodcom data, is calculated at 4.4 billion. Total consumption increased by 22% annually between 2006 and 2010. As a result of the economic crisis, consumption showed an irregular growth pattern. From 2006 to 2008, consumption grew by 18%. In 2009, consumption grew by just 6%, to increase strongly by 54% in 2010. Romania is now the 13th largest market in the EU, after Slovakia and Hungary, but ahead of Portugal and the Netherlands. Consumption equalled 1.6% of total EU consumption. The aftermarket is estimated to have totalled around 1 billion in 2010. Consumption of parts and components is expected to increase, as a result of increased car assembly and a growing aftermarket.
Apparent consumption of parts and components by category in million change 2006 - 2010 Consumption 2010 CAGR % Total 4,413.0 22.0 Bodies and parts 593.0 14.0 Engines and parts 970.0 30.0 Drivetrain and parts 347.0 6.3 Vehicle electric 479.0 25.0 Electric equipment parts 199.0 33.0 Materials 68.0 6.2 Other parts and accessories 1,455.0 27.0 Tyres 294.0 23.0 Trailers and trailer parts 7.6 28.0

Apparent production of parts and components by category in million change 2006 - 2010 Production 2010 CAGR % Total 6,090.0 19.0 Bodies and parts 901.0 20.0 Engines and parts 654.0 63.0 Drivetrain and parts 350.0 19.0 Vehicle electric 1,712.0 7.6 Electric equipment parts 155.0 58.0 Materials 46.0 21.0 Other parts and accessories 1,469.0 21..0 Tyres 797.0 25.0 Trailers and trailer parts 5.5 n.a.

2. Production 2. 1. Car industry The automotive industry has been one of the most profitable sectors of the Romanian economy in recent years. According to the Romanian Association of Car Manufacturers, the automotive industry contributed EUR 9 billion to Romania's GDP in 2010. The Romanian automotive industry employs approximatively 120,000 people (direct employment only). The potential for development of the automotive manufacturing industry is higher in Romania than the other countries of Central and Eastern Europe. The production of cars per 1,000 people is 10 times lower in Romania than in Slovakia and three times lower than in Hungary. Key figures of local production Production of cars increased above expectations and reached a volume of 323,587 units. The production of commercial vehicles maintained a high level of 27,325 units. Around 91 % of Romanias domestic car production was exported which indicates the importance of external demand. The Romanian auto industry is currently falling into a standard pattern for countries in Central and Eastern Europe (CEE) that is a very large domestic production capacity and limited domestic consumption. It is clear that the overall state of the Romanian auto industry is very likely to be dominated by macroeconomic factors in Europe. Automotive players Dacia / Renault The liaison between Renault and the Romanian brand Dacia started in the 1960s. First established as supplier factory for truck maker Roman, the plant in Pitesti was converted into a production base for the Dacia model, enabled

through a Renault license. Since 1999, activities have been upgraded and the plant modernized due to the majority takeover by Renault. The French Renault Group invested EUR 1.5 billion in Dacia which has a capacity of 350,000 cars per year. The company currently employs 13,823 workers. Approximately 91 % of cars built at the Dacia are exported to 60 markets on four continents. Today, Renault produces by far the largest portion (97%) of passenger cars in Romania. Romania symbolizes the transition to a new dimension of lowbudget cars under 7,000 euro. The Dacia Logan together with its derivate the Sandero hatchback, produced by Renault in Pitesti, are the cheapest cars in Europe. Ford Ford bought the Automobile Craiova plant for USD 57 million, planning to produce automobiles at a rate of over 300,000 units a year by 2010. Ford said it would invest 675 million (USD 923 million) in the former Daewoo car factory and that it would buy supplies from the Romanian market worth 1 billion (USD 1.39 billion). In September 2009, the company began to assemble the light utility vehicle Ford Transit Connect in Craiova, and in 2012, production of the new Ford B-MAX was started. By 2013 the Craiova factory will have installed production capacities able to produce 350,000 cars per year. The future shape of Romanias automotive industry will depend on how much of the chain of value added it can capture. It is unclear whether Romania ever will have the kinds of industry tiers of suppliers and sub-suppliers that characterize the auto industry in other countries, or simply host final assembly and a few large suppliers. To become more competitive, the Romanian automotive sector will have to continue to rely on foreign direct investment. For this, Romanian government authorities must strike an adequate balance between the social needs of the employees in this sector (salary levels) and the conditions required by foreign investors (cost competitiveness, infrastructure). Romania has a small but growing automotive cluster with a network of suppliers and components manufacturers. Most of the Romanian suppliers work in joint ventures with foreign partners, the Romanian party providing production facilities, utilities and engineering services, while the international car manufacturers bring in their brand, global know-how and services. These JVs produce for both the domestic market (e.g. for Renault-Dacia) and the overseas markets. 2. 2. Production of automotive parts and components The Romanian parts industry has experienced steep growth, which is aided by the large amount of locally produced parts and components used by Dacia. It has been estimated that almost 60% of the parts used by Dacia is domestically produced and that Dacia co-operates with over 200 Romanian producers. It should be noted that Dacia has its own production lines for engines and gear boxes. When purchasing the former Daewoo plants, Ford committed itself to source 60% of its future supplies in Romania itself, which will stimulate the automotive industry. At present, over 3,000 companies are active in the production of parts. Most of these pre-dominantly smaller

companies are expected to find it difficult to survive in the changing industrial landscape, as they use old technology and production methods. The most important production regions are in the western part of the country. (Acarom and Europe Auto Parts) Total production of parts and components, as calculated from ProdCom data, reached 6.1 billion in 2010, an average annual increase of 19% since 2006. Romania is now the 9th largest producer in the EU, after Poland and Sweden, but ahead of Hungary and Austria. Production equalled 2.2% of total EU production. The Romanian aftermarket for spare parts has seen strong growth and will continue to expand during the coming five years. Parts for older vehicles are especially in demand. Romania is a large country, which is experiencing strong economic growth. This will lead to increased disposable incomes and spending on transport and vehicles. Development of total consumption and production is pre-dominantly led by OEM trends and foreign direct investment. Dacia and Ford have attracted and continue to attract significant investments in the auto components industry, as suppliers seek to locate nearer these assembly facilities. The growth of OEM production of vehicles has led to a strong growth in the consumption of parts and components. This is expected to continue. Recent investments by suppliers Plastics parts, tanks, valves, pumps: German company Kautex Textron Exhaust systems: Borla, Cortubi, Honeywell Tires, steel cables: Continental (Germany), Michelin (France), Pirelli (Italy) Bearings: Koyo Seiko (Japan), Ina Schaffer (Germany) Seatings: Johnson Controls (US), Faurecia, (France) Gear boxes: Daimler Chrysler (Germany), DCI Wallbridge (US) Chassis: Auto Chassis International (France) Plastic rubber components: Phoenix AG (Germany), Solvay-Inergy (Belgium)

3. Key figures of exports and imports 3. 1. Export and import of vehicles In 2011, Romania exported 304,924 vehicles, which is 3.1 per cent less than the previous year, while imports dropped by 3.7 per cent, to 79,761 cars. Imports of all motor vehicles dropped 22.5 % in 2010, reaching only 76,078 units, and occurred in the context of a 21.5% decrease in passenger car imports (66,634 units). The sales of imported diesel passenger cars experienced another substantial drop of 26%, in line with the average decline in the imported car sales.

3.2. Import of automotive parts and components Total imports of automotive parts and components reached 2.7 billion in 2010. The share of EU imports was 1.4%. Romania is ranked number 15 in Europe, after Hungary and Portugal, but ahead of Denmark and Finland. Between 2006 and 2010, the average annual increase in total imports was 16%, which was much better than the EU average (-0.8%). Imports fell by 1% during 2008 and 2009, but grew especially strongly in 2010 (+32%). Romania had a positive trade balance of 2.3 billion in 2010, having exported 83% more than it imported. Imports from other EU countries amounted to 79% of total imports, which was lower than the EU average of 83%. Imports from EU countries increased by 16% between 2006 and 2010. The leading EU suppliers were Germany (share of 20%, 17% CAGR); France (18%, 15%); and Spain (6.6%, -1%). The share of imports sourced in developing countries reached 19% of total imports, which was higher than the EU average of 9.1%. Imports from developing countries increased by 43% during the period covered, much higher than the EU average growth of DC imports of 7%. Import from Thailand represented 1 % of the total component import. Total EU imports & DC suppliers, million imports 010 CAGR Trend DC suppliers 2010 CAGR Trend PARTS AND COMPONENTS Components 2010 CAGR (%) Total 2,713 Bodies and parts 605 Engines and parts 644 Drivetrain parts 594 Vehicle electric 211 Electric equipment parts 119 Materials 49 Other parts and access 244 Tyres 234 Trailers and parts AFTERMARKET PRODUCT GROUPS Gaskets 64 Shock absorbers 36 Wipers 16 Air filters 18 Exhausts 67 Oil filters 22 V-belts 24 Batteries 26 4. Import regulations Shipper may be required to be present for Customs clearance

16.0 28.0 13.0 18.0 21.0 10.0 6.6 9.1 12.0

1.3 12.0 75.0 10.0 22.0 13.0 7.4 4.6

Subject to Customs duties and value added tax For the import of new cars following taxes are levied for cars with engines smaller than 1800 cubic cm: Origin of car outside the European Community: 10% -30%. Origin of car from the European Community: 21% For cars with an engine over 1800 cubic cm, duties are 50%

IMPORT TARIFF and Tax issue (Auto parts and accessories)

Customs Duty: (in 2012)

HS No. 8507 8511 8707 8708 Description GSP (%) MFN(%) Electric accumulators 0 2.7 Electrical ignition or starting equipment 0 3.2 Bodies, for motor vehicles 0 4.5 Mechanical parts and accessories for motor vehicles 0 4.5

On top of these VAT of 24% has to be paid. VAT is calculated on the value of the goods, plus the international shipping costs and insurance, plus any import duty due Documents required: - Sales invoice clearly showing price paid, date and place of purchase, and conditions of delivery - Transportation invoice showing cost of transport (if applicable) - Original vehicle document showing shippers name, engine and chassis number All automobiles, including second-hand imports must be certified as meeting "Euro2" anti- pollution norms. Shippers should included documentation from dealerships and manufacturers specifically certifying that the automobiles have "Euro2" consistent standards. 5. Marketing Trade channels and partners The Romanian aftermarket offers most opportunities for manufacturers in developing countries including Thailand, as access to it is easier than to the OEM supply chain. Distributors/wholesalers are the best channels to access the aftermarket. Given the size of the industry, some opportunities are also present for contract manufacturing and outsourcing. The Romanian distribution chain is still very fragmented, containing many small local players. This is expected to change, though slowly. Romania could be served by an agent or importer in Hungary as well. It is advisable to conduct indepth research into reliability before entering into a serious business relationship with an agent or importer. The following are distributors and wholesalers of interest: Autonet - member of Auto Teile Ring - http://www.autonet.ro - one of the leading Romania distributors. Meteor - http://www.meteor.ro - part of Meteor Hungary, Temot member. Unix - http://www.unixauto.ro - part of Unix Auto Hungary, ATR member.

Winner Parts - http://www.winnerparts.ro - importer/distributor of parts for Italian cars and commercial vehicles. Cridem / Accessori Auto - http://www.accesorii-auto.ro - importer/distributor of car parts and accessories. Sprinter Distribution - http://www.sprinter-distribution.ro - specialised in the distribution of electrical products, including batteries and lighting parts. Contract manufacturing and outsourcing Romania has a sizeable and strongly growing parts and components industry and, as such, can offer opportunities for contract manufacturing in the OEM chain. It should be kept in mind though, that the Romanian automotive industry is one of the key competitors in the EU. Furthermore, large distributors could be interested in contracting the production of private label products and unbranded automotive parts and components.

Selecting a suitable trading partner Trade fairs are the most common way to make contact with potential customers and offer the ability to showcase your company, as well as become informed about the competition. The type of organisation which suits your company best is dependent on your product range and target group. Useful sources for the aftermarket Acarom - Romanian Association for Automotive Manufacturers http://www.acarom.ro -offers a list of parts manufacturers on its website, searchable by product type. Doing Business http://mcir.doingbusiness.ro/en/top/automotiveindustry/automotive-parts-distibutors directory with companies active in the parts industry, including manufacturers and dealers. Useful sources for contract manufacturing and outsourcing ACAROM - http://www.acarom.ro - association of automotive manufacturers of Romania. Automotive index - http://www.automotive-index.com Trade organisations APIA - Association of Vehicle manufacturers and importers http://www.apia.ro Acarom - Romanian Association for Automotive Manufacturers http://www.acarom.ro - publishes the Acarom Yearbook with information on the Romanian market. Trade fairs
AUTO PARTS EXHIBITION 2012

This exhibition dedicated to auto after market services in Romania. AUTO PARTS EXHIBITION 2012 to be held on 07-10 Nov 2012. It is on Workshop equipments for car service & repair, Car-Wash equipments, Spares & accessories for car service & repair equipments, Bodywork repair & painting equipment & supplies, Diagnostic &

performance equipment & supplies, Refueling equipments, safety products and recycling, Automotive parts & accessories, Tuning parts & accessories, Tires & automotive batteries, Automotive fuel & lubricants, Automotive chemicals, Leasing for car service & repair equipments. Organiser: ROMEXPO EXHIBITIONS CENTRE 65-67 Marasti Blvd., Bucuresti 011465 (Romania) Tel: 40-21-2077000//2077022/2025745/2077008 Fax: 40-21-2077070 Project manager: Ms. Camelia Buda

Trade press INFO APIA - http://www.apia.ro - info bulletin published by APIA. Auto Expert - http://www.autoexpert.ro Auto Business - http://www.auto-business.ro

Thai Trade Center Budapest Harangvirag u.5. 1025 Budapest, Hungary Tel: (361)212 2738 e-mail: thaicommbp@mail.datanet.hu