Latvia tries to squeeze into Europe's car industry

  • 2001-10-25
  • TBT staff
RIGA - After a major conference of car manufacturers in Riga, experts cautioned that until it joins the European Union the country's chances of elbowing its way into Europe's car market remain slim.

"The state is ready to support companies willing to invest in this industry," Latvian Prime Minister Andris Berzins said Oct. 19 at the opening of the International Car Makers' Association general assembly which took place in Riga Oct. 18-20. "We can offer production facilities and land to build on, sufficiently qualified labor and a business-friendly environment. The Latvian side is ready to constructively view any serious offers."

The association's president, Yves de Belabre, said Latvia could become a place where car makers from other countries produce car parts but initially would have to start small because the market is already saturated.

Belabre, who is also chairman of the French Car Makers' Association, observed that the world's car makers are now setting up plants nearer to buyers and source parts from suppliers which are also nearby.

To become a parts supplier the producer should offer a reliable supply of quality goods at acceptable prices, he said. "If Latvia can offer innovative products which raise the quality of cars then why could it not become a supplier to car makers?" Belabre asked.

Janis Pormalis, president of the Latvian Association of Authorized Car Dealers, said EU membership is essential if Latvia is to attract foreign car makers.

Holding the assembly in Riga meant business leaders had been able to think about the country as a potential location for car parts manufacturers, he said.

The experience of Latvia's neighbors shows that attracting car makers is a tough task. The Estonian government tried to get German car maker BMW to build a new plant in the country this year, but in July BMW announced the 1 billion euro ($909.09 million) plant would be sited in Leipzig, Germany, creating approximately 5,000 new jobs at the plant and the same number in the surrounding area. Among the 250 possible locations examined by the company Estonia did not even make it on to the short list of five.

Berzins pointed out that in 2000 Latvia had the highest growth of any country applying for EU membership. Gross domestic product grew 6 percent last year and 8.8 percent in the first half of 2001.

"Statistics show a resulting increase in car sales," said Berzins. "Used car sales grew 89 percent and trade in new vehicles also got more brisk. I'm sure that as a percentage of total car sales the number of new cars being sold will grow most rapidly in the coming years."

He agreed that the Latvian market was not large in absolute figures but pointed out that the country is already an integral part of the common Baltic market and expects to join the Nordic market.

"This country allows access to the vast markets of Russia and other members of the Commonwealth of Independent States," he said.

The International Car Makers' Association was founded in 1919 in Paris and currently comprises over 40 national associations of car manufacturers from all over the world. Its key objectives are to protect the interests of car manufacturers and importers, and to study issues and problems concerning the industry's future development.