Report "Polish Automotive Market: Passenger Cars, Suppliers and Aftermarket 2007-2010":

Poland is, with a population of almost 40 mio., the largest market in Central and Eastern Europe (“CEE”). With a GDP per capita slightly over 10.000 USD in 2007, GDP growth rates between 5% and 6%, and average wages at 700 EUR / 950 USD, Poland is also a relatively prosperous market in CEE.

Poland’s car penetration is still much lower than in Western European markets and also some other CEE markets like Bulgaria are better positioned in terms of car penetration. In terms of car parc however, Poland is leading the CEE countries. The car parc, however, is relatively old.

Since Poland became a member of the EU in 2004, the Polish car market has been flooded with imports of used cars. These imports reached almost 1 mio. in 2007, mainly consisting of relatively old and hence very cheap cars.

In the course of this development, the new car market broke down to less than 50% of sales of 1999. It is only since 2007, that the new car market rebounds. We predict growth of about 7% for the years until 2010. Nevertheless, the Polish new car market is and will remain the largest in CEE and the third largest of all former communist countries (CEE and CIS together), only surpassed by Russia and Ukraine. We strongly expect the new cars market to increase further, while imports of used cars will decrease over the next years.

Dealerships had to cope with reducing sales of new cars and most of them are earning additional income with a lively trade in second-hand cars. There is still substantial room for growth of dealership-networks of the OEMs.

Financing of cars is well established, with loan financing being the preferred method by private individuals and leasing being the preferred method by corporate buyers. Financing used car purchase is also widespread, which supports the short holding cycle of Polish car owners.

Poland has no own passenger car brand. FSO was its last independent brand and is now owned by ZAZ, an Ukrainian car maker, using FSO as a production base for the Urkainian markets. FSO is manufacturing Daewoo-based models. Apart from FSO Fiat, Opel and VW are producing cars in Poland. Other OEMs are manufacturing components with engines becoming a specialty of the Polish automotive market. OEMs and other suppliers use Poland as a low-cost manufacturing base for the European market. They rarely produce for the Polish market itself. The production of cars will likely exceed 1 mio. units in 2010. Even though some OEM are considering new projects or the expansion of existing ones in Poland, the wage increase of recent years and the shortage of qualified personnel are becoming serious limitations to further growth of the industry.

Given the development of production projects, the components market will grow by 14% annually over the next years to 2010. Most of that market potential is captive through existing suppliers to the OEM.

The aftermarket is growing by over 5% over the next years to 2010. The aftermarket is one of the most attractive sectors of the Polish automotive industry over the next years. With further additions to the parc, whose average age is decreasing and with more demanding consumers, better and more frequent service and better parts are needed.

There are numerous parts manufacturers present in Poland, but only few of them are still in Polish hands. As with OEMs, parts manufacturers are mostly targeting export markets and rarely cater the local aftermarket.

The Polish distribution system for spare parts is dominated by about 10 larger importers and distributors. However, there are many smaller importers active as well. It is likely, that further consolidation will reduce the number of players. For foreign parts manufacturers, the main challenge is access to service stations, to spare part shops and eventually to the end customers.

In total, the Polish market for passenger car vehicles and the Polish aftermarket are very attractive markets. For companies active internationally, a strong presence in Poland is a must. The main challenge for OEMs operating in Poland is the competition through used car markets. Convenient financing options and an aggressive sales network with good coverage are the key to success. The main challenge for parts manufacturers is to find and manage the right sales channels to ultimatively reach consumers.

To prepare this market report, we used primary and secondary research methods: expert interviews and consumer surveys – in particular for the market of automotive parts, which is not covered yet by any substantial statistical data – and standard analysis of secondary information available on the topic. Based on our experience and developed competencies we have built proprietary market models to forecast future market development. The report was compiled in the period from October 2007 to January 2008 and hence includes statistical data until December 2007, if available.

For a table of content and a list of figures and tables, please see the details below.

The report contains approx. 85 pages and is priced at 890 Euro. To order, please use the order form attached or contact us at +49 (0)30 4005 49 0 or at marktforschung(a)globis-berlin.de.

Globis is a Germany-based consulting company with broad international coverage regarding strategy development, especially entry strategies into new markets.

TABLE OF CONTENTS 2

LIST OF FIGURES 4

LIST OF TABLES 6

SUMMARY 7

1 COUNTRY BASICS 10

1.1 Economic Development 12

1.2 Regional Economic Development 15

1.3 Poland and the European Union 18

2 POLISH PASSENGER CAR MARKET 19

2.1 Polish Car Parc 19

2.1.1 Structure of Car Parc by Age 21

2.1.2 Structure of Car Parc by Brands and Models 22

2.1.3 Car Parc in Regional Markets 25

2.2 Passenger Car Sales and Imports 28

2.2.1 Size of Market 28

2.2.2 Market Characteristics New Cars Market 32

2.2.3 Market Characteristics Used Car Imports 37

2.2.4 Sales Drivers for New Cars 39

2.2.4.1 Economic Growth and Income Levels 39

2.2.4.2 Used Car Imports 40

2.2.4.3 Changing regulatory environment 41

2.2.4.4 Car Financing 43

2.2.4.5 Dealership Networks / Distribution Systems 45

2.2.4.6 Consumer preferences 48

3 POLISH COMPONENTS AND SPARE PARTS MARKET 50

3.1 Car Production and Components Market 50

3.1.1 Production 50

3.1.2 Components Market 54

3.2 Polish Aftermarket 61

3.2.1 Market Segments Aftermarket (OE, IAM, Fakes) 61

3.2.2 Market Size Aftermarket 63

3.2.3 Distribution System for Spare Parts 66

3.2.3.1 Parts Importers and Distributors 68

3.2.3.2 Spare Part Shops 70

3.2.3.3 Service Stations 70

3.2.3.4 Other Supply Channels 74

4 OPPORTUNITIES AND RISKS 75

5 APPENDICES 77

5.1 Major Polish Cities 77

5.2 Regulations and Fees for Car Imports from Non-EU 80

5.3 Sales of Foreign Brands in Poland, 2004-2006 81

6 ABBREVIATIONS 84

Figure 1: Polish Voivodships 11

Figure 2: GDP Growth Rates at Constant Prices, Change to Previous Year, 2002-2010 13

Figure 3: Development of Nominal Wages in PLN, 2003-2010 14

Figure 4: Inflation Rates 2001-2008 15

Figure 5: Share of Leading Voivodships in Total GDP, 2006 16

Figure 6: Development of Passenger Car Parc, in Mio., 1990-2010* 19

Figure 7: Car Penetration in Poland and Selected Other Countries, 2006/2007 20

Figure 8: Structure of Polish Car Parc by Age, 2007 21

Figure 9: Structure of Imported Used Cars by Age, 2005-2007 22

Figure 10: Top-Ten Brands in Polish Car Parc, 2007 24

Figure 11: Sale of New Cars in Poland, in 1.000, 2000-2010 29

Figure 12: Import of Used Cars into Poland, in 1.000, 2000-2010 30

Figure 13: Relative Sales and Import Structure of Car Market, 2000-2010 31

Figure 14: New Car Sales by Segment, 2005 35

Figure 15: New Car Sales by Typ of Engine, 2005-2007 36

Figure 16: Top Ten Brands of Imported Used Cars, 2007 37

Figure 17: Age Structure of Newly Imported Used Cars into Poland, 2006-2007 39

Figure 18: Share of Financing Arrangements for New Car Purchase, 2007 43

Figure 19: Volume of New Leasing Contracts for Passenger Cars, in Mio. PLN, 2000-2007 44

Figure 20: Factors Influencing Car Dealers’ Business / Overall Market, 2007 48

Figure 21: Key Criteria Influencing Car Choice in Poland, 2007 49

Figure 22: Production of Passenger Cars in Poland, in 1.000, 2000-2010 53

Figure 23: Development of Automotive Components Market in Poland, 2002-2010 55

Figure 24: Share of OE-, IAM-, Fake-, Used-Parts for Routine Service, 2007 62

Figure 25: Reason for Poles’ Preference of IAM-Parts, Single-Choice, 2007 62

Figure 26: Size of Polish Aftermarket, in bn. EUR, 2007-2010 65

Figure 27: Aftermarket for Important Spare Parts, mio. EUR, 2007-2010 65

Figure 28: Main Distribution Channels for Spare Part Distribution to Car Holders, 2007 66

Figure 29: Shares of Spare Parts Sales Channels for Non-OE, 2007 67

Figure 30: Share of Service-Channels Used for Car Repair and Maintenance, 2007 74

Table 2: Population development in Voivodships, in 1.000, 2007-2010 . 12

Table 3: Income per Capita in Regions, 2006 17

Table 4: Economic Key Figures EU / Poland, 2006 / 2007 18

Table 5: Most Popular Models by Top 5 Brands in Polish Car Park, 2006/2007 25

Table 6: Regional Car Parks by Number of Vehicle and Car Penetration, 2007 26

Table 7: Share of Park and of Imports by Regions, 2006/2007 28

Table 8: Sales and Import Structure of Car Market, 2002-2010 32

Table 9: Top Selling Brands (New Cars), 2006-2007 33

Table 10: Top Selling Models (New Cars), 2006-2007 34

Table 11: Sale of Used Cars by Model, 2006 38

Table 12: Largest Car Dealerships in Poland, 2007 45

Table 12: Dealership and Service Networks of OEMs in Poland, 2007 47

Table 13: Passenger Cars Manufactured in Poland, 2006-2007 51

Table 14: Major Polish Component Suppliers and Service Providers 59

Table 15: Major Foreign Component Suppliers in Poland 61

Table 16: Largest Independent Importers and Distributors of Spare Parts 68

Table 17: Service Station Networks of Largest Independent Parts Distributors, 2007 71

Table 18: Major Service Chains not Bound by Parts Distributors, 2007 73

Table 19: Main Polish Cities over 100.000 Citizens 79

Table 20: Sales of Foreign Brands, in Units, 2004-2006 83