Eastern and Central Europe – a wealth of opportunities

4 min read

At the end of communism in the 1990s, the citizens of Eastern and Central Europe began to make up for lost time. They shrugged off the structures of the planned economy, carried out extensive privatisations and joined the global economy. Double-digit growth and newfound spending power made it one of the world’s boom regions. Now the global economic downturn has brought that to a halt.

However, many observers believe that the region’s long-term business potential remains and that when the global economy gets back on track the region will be well placed to thrive again, fuelled by investments in infrastructure and a rapidly growing automotive industry.

The automotive market

While the automotive industry worldwide has had a torrid time over 2009, Eastern and Central European car factories have fared better than most. While production volumes for cars fell by about 30% in Western Europe between 2007 and 2009, the drop in Eastern and Central Europe was 20%.

“European original equipment manufacturers (OEMs) have factories across this region mainly producing small cars,” says Didier Burger, Sales Director Europe for Trelleborg Automotive AVS. “The only cars selling currently are small cars. This means Eastern and Central European car production is supported by government actions in Western Europe such as the ‘scrapping bonuses’ where consumers are paid a cash bonus for scrapping their old cars and buying new ones.”

Expectations are that the automotive sector in Eastern and Central Europe will experience major growth driven largely by domestic demand. The single market with the greatest individual potential is Russia.

“Russia is one of Europe’s two largest car markets, and all major manufacturers are represented here,” says Roman Antipov, who is responsible for sales for Trelleborg Automotive in Russia. “The future also looks bright for countries such as Slovakia and Romania, where they have local production of good-quality, low-cost small vehicles.”

Trelleborg produces parts for the automotive sector across the whole of the region, from Poland to Turkey, and will begin manufacturing in Russia when the opportunity arises. 

“There will be a clear move to Eastern and Central Europe by the OEMs when the market restarts,” says Burger.

Infrastructure

Some nations in the region, among them Romania and Bulgaria, are attempting to invest their way out of the crisis by pouring money into infrastructure, education and environmental-protection schemes.

“Right now, also this part of the world is affected,” says Keith Croysdale, Sales and Marketing Manager for Trelleborg Industrial AVS, which has healthy sales of antivibration systems for trains in the region. “But the governments are trying to keep spending on the essential ingredients for increased growth, and certainly infrastructure is a big part of that.”

Trelleborg has been involved in several prestigious projects in the region, including the St. Petersburg flood-barrier project and the massive refurbishment of the Bolshoi Theatre, and Croysdale sees a wealth of new opportunities.

“Many cities in the region have road transport infrastructure issues, and the pressure is on to come up with mass-transit solutions,” he says. “They are planning for new buses, coaches, trains, underground systems and bridges over the next 25 years.”

Home market

The improvements in living standards in Central and Eastern Europe that give rise to developments in agriculture, the food industry, infrastructure and general industry will provide considerable market opportunities for us,” says Peter Nilsson, Trelleborg’s President and CEO.

"An ever-growing portion of our plants are located in the Eastern regions of Europe," says Nilsson. "This is largely because we want to establish a local presence in these emerging markets. It has also been easy to find competent personnel there – individuals with high ambitions and immense commitment. The time when plants were established in this region purely because of lower costs has passed.”

The major Russian market – in which Trelleborg has been active for more than 15 years – has been somewhat of a special case and has taken a longer time to fully understand than its neighbours. The reason is the enormous geographic distances within the country, which impose special demands on distribution and presence.

“For some time now, we have been active in construction-related projects and infrastructure developments in Russia," says Nilsson. "We have also completed project-oriented ventures in the oil and gas industry, while our protective suits have been a real success story in Russia. We can also see how the major automotive manufacturers are establishing a presence in the country and how the market is adapting to prevailing international standards. We shall certainly play a part in the Russian automotive industry of the future.”

Trelleborg now also has its own market representation in Russia in its Automotive business area. The automotive component plants in Poland, the Czech Republic, Slovakia and the most recent addition in the east – Romania – together with an expansion in Turkey, provides a firm foundation for growth in the east.

Similar to the bordering countries of Ukraine and Kazakhstan, Russia is a large food producer. In pace with the modernisation of agriculture in these countries, the need for modern agricultural tyres is growing. Distribution is also part of the challenge in this area.

According to Peter Nilsson, the process industry is expanding too, creating a large market for Trelleborg’s Sealing Solutions: “We have a presence all over Eastern and Central Europe, and have recently opened a market company in Russia to deal directly with our customers there.”

Russian focus

Recently Russia has been a particular focus area for Trelleborg Sealing Solutions. At first customers were served through the Bulgarian marketing company, but now a fully operational marketing company has been created.

“Customers in Russia really appreciate dealing directly with us rather than through a distributor,” says Yordan Vassilev, Business Development Director for the region. “From our base in Moscow we provide specialised support through a fully trained staff and a local stock of seals.”

The Russian marketing company has been particularly successful in the aerospace industry, supplying a wide range of seals for Russian Regional Jet engines. It is also a supplier to the booming oil and gas industry. In the automotive industry, the company is supplying seals for the pistons of car shock absorbers. At the same time it is building on Trelleborg Sealing Solutions expertise elsewhere, including in the fluid power segment, where seals are used in off-road and agricultural equipment.

In northern Russia, Trelleborg Engineered Systems has recently secured a contract for the Prirazlomnoye oil platform, currently under construction at one of Europe’s largest shipyards, Sevmash in Arkhangelsk. Trelleborg will be supplying special seals, pipe penetration seals and fire-proof hatches.