The automotive industry in Poland is one of the driving forces of economic growth, accounting for approximately 8% of GDP. In the first half of this year, the number of new car registrations increased by 16%[1]. While the sector is stabilizing after years of crises, the debt levels among companies remain alarmingly high. Data from the BIG InfoMonitor Debtor Register and the BIK credit information database reveal that by the end of July 2024, the liabilities of wholesale and retail car dealers, as well as companies repairing these vehicles, amounted to over PLN 1.2 billion. Additionally, the car rental and leasing segment added to the industry’s debt with unpaid invoices exceeding PLN 217 million.
The wholesale, retail, and vehicle repair sectors are essential parts of the economy, facilitating the flow of goods and the transportation of people. Despite their crucial role in the development of other economic sectors such as logistics, manufacturing, and services, these sectors face significant challenges. According to data from BIG InfoMonitor and BIK, by the end of July this year, out of nearly 252,000 companies specializing in car trade and repair, more than 14,000 were in debt (5.6%). Each of these companies has an average of PLN 86,300 in overdue liabilities.
Financial difficulties are also affecting companies offering car rental or leasing services, such as popular leasing and car-sharing firms. During the same period, 1,795 companies in this sector had overdue payments. While this number might seem small at first glance, considering the approximately 12,000 companies in this segment, 15% of them (about one in seven) are generating debt.
The total debt across all the aforementioned categories in the automotive sector now exceeds PLN 1.4 billion! This is the equivalent of over 35,000 brand-new mid-range cars sitting idle at dealerships. If all these vehicles were lined up bumper to bumper, assuming each car is about 4 meters long, the line would stretch 140 km, equivalent to the distance from Warsaw to Łódź.
“For car dealers, the main problem is the rising cost of vehicle purchases, driven by increasing prices of raw materials and components, which raises the cost of bringing cars to market. Repair companies are struggling with the rising costs of spare parts and maintenance materials. Meanwhile, the car rental and leasing segment faces rising fleet maintenance costs. All these companies also have to contend with new EU regulations and increasingly strict environmental standards, which can place additional strain on the entire automotive sector,” emphasizes Sławomir Grzelczak, President of BIG InfoMonitor.
Decline in Showroom Traffic and Surge in Registrations
According to the Polish Car Dealers Association, the end of 2023 saw significant declines in the industry, particularly in the number of customers (-18.9%) and showroom visits (-19.5%)[2], despite the increasing number of new vehicle registrations. On one hand, dealership owners are returning to pre-pandemic levels with improving registration numbers, but on the other hand, experts note that fewer people are making in-person visits to dealerships. Rising car prices could be a contributing factor. It is also worth noting that the primary buyers of cars from dealerships are fleet customers, whose share of the market is nearing 70%.
All of these factors contribute to mixed sentiments in the wholesale, retail, and vehicle repair sectors, which, as of the end of July 2024, were burdened with over PLN 1.2 billion in debt. While the high demand among customers brings hope for a positive year-end, business owners remain cautious about the next twelve months.
“Next year, we can expect a significant rise in car prices. It’s possible that some customers who are aware of this will buy a car this quarter or the next. Therefore, I believe the end of this year will be at least as good as last year, if not better. However, for the same reason, we may see a downturn in the industry next year. This is the biggest challenge that dealers will face. This situation could impact the financial health of companies in the wholesale and retail car sales sectors. However, the change should be minor, as despite rising car prices and some companies’ debt, the majority of them will remain stable,” assesses Jakub Faryś, President of the Polish Automotive Industry Association.
Boom in Car Rentals
Data from the Polish Car Rental and Leasing Association (PZWLP) shows that long-term rentals in Poland grew by 7.9% year-on-year in the first half of this year. The “Rent a Car” industry grew by 1.1% year-on-year as of the end of June[3]. Meanwhile, a survey conducted by Santander Consumer Multirent found that one in five Poles uses car rental services for personal purposes[4]. The increase in interest in shared vehicles could be attributed to the decreasing profitability of owning a car and changes in consumer lifestyles.
Despite the trend toward car rentals, a significant portion of the industry is struggling with debt. Out of nearly 12,000 companies listed in the BIG InfoMonitor Debtor Register and BIK database, almost 2,000 (15%) are in debt, with liabilities totaling PLN 217 million.
Regardless of the segment within the automotive sector, addressing the issue of high debt levels requires understanding the phenomenon of payment delays.
“In the third quarter of this year, more than 53% of companies across Poland struggled with invoices overdue by more than a month, highlighting the serious issue of payment delays. These problems generate additional debt, leading to a growing spiral of liabilities. The automotive industry, despite still enjoying demand and customer interest, faces many challenges, with rising unpaid debts being one of the key issues. It will be crucial to find a balance between business growth and responsible debt management and restructuring. Carefully verifying the credibility of business partners and reporting unreliable companies to debtor registers can help minimize the risk of delayed payments,” says Sławomir Grzelczak, President of BIG InfoMonitor.
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[1] https://www.pzpm.org.pl/pl/Rynek-motoryzacyjny/Roczniki-i-raporty/Raport-kwartalny-PZPM-i-KPMG-Branza-motoryzacyjna-Edycja-Q2-2024
[2] https://zds.org.pl/rejestracje-nowych-samochodow-w-polsce-lipiec-2024-raport-zds-i-pzpm/
[3] https://pzwlp.pl/8-sierpnia-2024-r-wyniki-pzwlp-po-ii-kwartale-2024-informacja-prasowa
[4] https://www.scmultirent.pl/blog/wpis/juz-co-piaty-kierowca-wynajmowal-auto-do-celow-prywatnych
Source: https://managerplus.pl/dlugi-w-motoryzacji-rosna-na-pelnym-gazie-31331
