Poland is a hard place to figure out for aftermarket manufacturing executives. That’s because if you took many different strategies for selling in Poland and throw them against the wall, almost all of them would stick. So to define your company’s market strategy in Poland, you need to understand where this market has been, where it is today and where people are expecting it to go in the future.
The country of Poland is often described as one of the biggest success stories in the former Eastern Bloc. During the past 25 years since the Soviet Union fell, Poland has aggressively modernized, building new infrastructure, developing industries and democratizing its politics. Poland was the only member of the European Union (EU) whose economy did not dip into a recession during the 2008-2009 downturn. Skillful manipulation of public policy and expansionary economic policies were credited for keeping the economy growing.
Having a population of nearly 39 million people, Poland is one of the three largest Eastern European nations. The makeup of the country’s population is very homogeneous, with 97 percent of the people identifying as ethnically Polish. With nearly 70 percent of its population under the age of 55, it is poised to remain a demographically viable and robust economy. There are several caveats to that, however.
Even though the economy has been robust and growing, it is still well below the per capita gross domestic product of fellow EU nations. As such, many of the best and the brightest have emigrated to other EU nations seeking better opportunities. Another concern that is consistent with many industrialized economies, fertility rates are below what would be considered a positive driver of population growth rates. These challenges aside, Poland’s aftermarket is growing today as the numbers of motor vehicles keep growing.
Poland ranks approximately 17th in the world with a per capita motor vehicle population of 580 per 1,000 inhabitants, or roughly 24 million motor vehicles. This places Poland ahead of the United Kingdom and France, as well as other Western European counties in terms of motor vehicle density by population. There are no truly dominant brands or models in Poland.
During 2015, 49 different nameplates combined to sell 351 different models. Of the 410,000 new vehicles sold in 2015, the Skoda Octavia led the market with 14,200 units (3.5 percent), trailed closely by the Skoda Fabia with 12,390 units (3 percent). Many models near the bottom had only anecdotal sales. For example, the Cadillac Escalade tied with Aston Martin’s DB8 for one unit sold each.
Statistically though, the top 10 brands that dominated Poland in 2015, and account for 68 percent of new car sales are: Skoda (11.2 percent), Volkswagen (9.8 percent), Toyota (8.9 percent), Opel (7.8 percent), Ford (7.5 percent), Renault (6.9 percent), Fiat (4.7 percent), Kia (4.3 percent), Hyundai (4.0 percent) and Peugeot (3.9 percent). The only truly dominant manufacturer group in Poland would be the Volkswagen group at 25 percent market share. The group also includes, Audi, Seat, Skoda and Porsche. The Renault Group (Renault, Dacia and Nissan) come in second at 13.7 percent. The Hyundai-Kia group ranked third with 8.3 percent.
Poland might actually be a cautionary tale of why new car sales might not reflect the true nature of the vehicle car parc. Poland has always had an affinity for used cars. And the importation of used cars typically outstrips the volume of what is sold as new. For example, according to KMPG, in 2015 there were 711,000 used cars imported into Poland. This is nearly 300,000 more units than were reported as sold as new. And these imported units tend to be older models.
According to the Polish Ministry of Finance, registrations of imported vehicles, going back to 2004, reflect that 45 percent of vehicles imported each year are more than 10 years old, while another 45 percent or so are between 4 to 10 years of age when imported into Poland. Only 9 percent of imported used cars are less than 4 years old. This presents a rather large opportunity for aftermarket suppliers because it’s generally accepted that most vehicles are in their prime repair cycle when they are between 7 and 14 years of age.
With nearly two-thirds of all new registrations coming from cars imported by individuals, it’s very difficult to assess what the true picture of vehicles in operation are. For example, Chevrolet officially sold five new vehicles in Poland in 2015. Yet on one popular used car website, more than 4,000 Chevrolets were listed, ranging from 1928 to 2016 model years, including four different 1957 Chevy Bel Aires. By and large, however, most cars that are imported into Poland tend to be German, Italian or French in origin.
The prevalence of European cars gives marketers a clue as to the assortments they would likely need to have to be successful in the Polish aftermarket. Most new vehicles, and a significant portion of those imported are manual transmission models, and overwhelmingly, they are equipped with smaller displacement engines. So if it is your goal to capture market share within your category, the focus should be on smaller European vehicles. However, with the popularity of importing specialty models, like Jeeps, American made pickup trucks, and other larger vehicles, a nimble supply chain to get those needed parts would also prove to be a profitable strategy. In fact, there is a cottage industry of specialty importers who specialize in flying parts into Poland on an “as-needed” basis to service this market.
One aspect of the Polish automotive market that is a bit darker, is the fact that Poland has become a hub for transiting stolen cars from Western European to Eastern Europe. Since Poland joined the EU and became a part of the Shenghen Agreement, which eliminated border security between EU members, there has been nearly a 90 percent increase in car thefts throughout Germany. In some border towns, like Frankfurt un Der Oder, the increase has been seven fold.
In fact, in 2012, the Polish Ambassador to Germany, Marek Prawda, famously told an interviewer that perhaps cars in Germany were “too easy to steal.” To be clear, there are criminal gangs operating in Poland, who now freely cross into Germany and other Western European countries to steal vehicles, and transit them through Poland, usually to Russia, or other Eastern European nations.
Planning your portfolio for the Polish market will require a certain amount of forethought. As a member nation of EU, parts offered for sale in Poland must conform to all the EU rules that are commonly in place. One key factor to remember is that there is an import duty ranging between 3 percent to 4.5 percent on auto parts. Additionally, EU rules require certain products like catalytic converters, automotive signal lighting and brake pads to be pre-approved by type based on existing EU regulations.
The importation of some aftermarket products, such as lubricants, may be covered under different agreements, like the “Registration, Evaluation, Authorization and Restriction of Chemicals Regulation” (REACH). Some tuner parts might be covered under the “Low Voltage Directive” (LVD), or the “Electromagnetic Compatibility Directive” (EMC). It’s important to do your homework ahead of time, lest you find out that your products were confiscated by customs.
Access to the Polish aftermarket is gained through three main channels. The first is through specialty importers, which focus on those directly imported Western vehicles that do not represent a significant market share within Poland. These importers typically travel to shows in the West and do a significant number of purchases through online sources such as Rock Auto. They also consolidate purchases with exporters from the U.S., and make shipments several times a year.
The second avenue of aftermarket access is through the OE service channel. Original equipment suppliers (OES) can sell their parts through vehicle manufacturer authorized dealer networks. Throughout Europe, the OES channel represents a significant part of the aftermarket. For example, in Germany, OE service accounts for nearly one third (33 percent) of aftermarket sales. In Poland, the OES channel plays a much smaller role, representing only 8 percent of aftermarket sales. As is typical in Eastern European countries, the independent repair facilities represent 92 percent of the market.
The third and largest aftermarket sales channel is the independent distributor. The Polish aftermarket is largely dominated by warehouse distributors who belong to the major buying groups throughout Europe. These now familiar groups include Temot, Nexus, ADI and ADR. Many of these groups have formed alliances with U.S. buying groups as well, but by and large, the European groups operate independently of the U.S. groups. The dominance of these group-affiliated distributors makes it difficult for new entrants into the market.
Bogumił Papierniok, managing director of Moto-Profil Sp. z o.o. and a member of the Temot International group, recently said, “It is sure that new players will try to come to Poland/Czech/Slovakia. But I doubt there is a place for them in Poland. That means that those new ones will have to push somebody out or buy them out.” However, he did point out that as the market has been growing, there is some space for smaller, niche distributors. Papierniok went on to say, “the development of small and medium size local warehouse distributors into importers with growing portfolio and market coverage [will be important]. Very often these companies are much more aggressive, especially in their pricing policy.”
For North American aftermarket manufacturers, the Polish market represents a growing, lucrative market. The fact that so many vehicles are positioned in their prime repair cycle years means that hard replacement parts, as well as maintenance parts, will drive aftermarket growth for the foreseeable future. And as economic growth rebounds across Europe, the Polish economy will continue to benefit as a manufacturing hub for the European continent.
Of course, there will remain significant portfolio planning challenges, owing to the uncertainty of the true vehicle parc. However, working with the right distribution partner can prove to be a valuable source of market data for manufacturers. Whatever strategy your company may choose to adopt, the fact that Poland is a secure member of the European Union, with a growing and dynamic economy, will ease some of the uncertainty when doing business in a foreign land.
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