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Dawn of the Dacia: how Romania’s no-thrills car maker raced ahead Dawn of the Dacia: how Romania’s no-thrills car maker raced ahead
(about 3 hours later)
Walking through the assembly plant at Dacia’s sprawling factory complex in Mioveni, 80 miles north-west of the Bucharest, the Romanian capital, Cristian Negoita talks proudly of the factory’s output. “We make around 65 cars an hour, 1,389 a day,” says the 25-year company veteran and deputy chief of the assembly plant. “Before we joined Renault we were making 110,000 cars a year here with 30,000 workers, today it’s 340,000 cars, with 14,000 workers.” Walking through the assembly plant at Dacia’s sprawling factory complex in Mioveni, 80 miles north-west of Bucharest, Cristian Negoita talks proudly of the factory’s output.
Nearby, new cars roll off the assembly line, destined for showrooms across Europe. Over the past few years, as other car manufacturers have lost billions of euros in sales in the aftermath of the global recession, the Romanian brand Dacia, owned by Renault SA, has seen its sales soar. “We make about 65 cars an hour, 1,389 a day,” says the 25-year company veteran and deputy chief of the assembly plant. “Before we joined Renault we were making 110,000 cars a year here with 30,000 workers, today it’s 340,000 cars, with 14,000 workers.”
The former communist state-owned automotive company, bought by Renault in 1999, has become Europe’s fastest-growing car brand, with sales on the continent rising 35% in the first six months of this year, according to the European Automobile Manufacturers Association, fuelled by a high demand for cheap but reliable cars. Nearby, new cars roll off the assembly line, destined for showrooms across Europe. In recent years, as other car manufacturers have lost billions of euros in sales in the aftermath of the global recession, Romania’s Dacia has seen sales soar.
Last year, in its first 12 months operating in the UK market, Dacia sold 17,146 cars, a record for a new UK car brand launch, with its entry-level Dacia Sandero – the butt of so many Top Gear jokes – retailing for just £5,995. The former communist state-owned company, bought by Renault in 1999, is Europe’s fastest-growing car brand, with sales on the continent rising 35% in the first six months of this year, according to the European Automobile Manufacturers Association, fuelled by a high demand for cheap but reliable cars.
Dacia’s success in recent years has raised its already considerable profile in Romania: its €4.48bn turnover in 2013 represented about 2.9% of the country’s GDP, with the company responsible for an estimated 130,000 jobs in Romania across its supply chain and 8% of the country’s total exports. Last year, in its first 12 months in the UK market, Dacia sold 17,146 cars, a record for a UK car brand launch, with its entry-level Dacia Sandero – the butt of so many Top Gear jokes – selling for £5,995.
Dacia’s success in recent years has raised its already considerable profile in Romania: its €4.48bn (£3.5bn) turnover in 2013 represented about 2.9% of the country’s GDP, with the company responsible for an estimated 130,000 jobs in Romania across its supply chain and 8% of the country’s total exports.
All of which is impressive for a car brand that few in Europe had heard of until recently and that was failing badly just a decade and a half ago.All of which is impressive for a car brand that few in Europe had heard of until recently and that was failing badly just a decade and a half ago.
“Dacia has found a space in the market, it was the first to see and exploit this low-cost sector,” says Tim Urquhart, principal analyst at IHS Automotive, who predicts that Dacia will sell 461,000 vehicles this year, and 604,000 by 2021.“Dacia has found a space in the market, it was the first to see and exploit this low-cost sector,” says Tim Urquhart, principal analyst at IHS Automotive, who predicts that Dacia will sell 461,000 vehicles this year, and 604,000 by 2021.
Dacia was founded in 1966, during the first years of the Ceaușescu regime. It was meant to be a powerful symbol of the country’s industrial strength, and was named after the Dacians, the early inhabitants of the region. Dacia was founded in 1966, in the first years of the Ceaușescu regime. It was meant to be a powerful symbol of the country’s industrial strength, named after the Dacians, the early inhabitants of the region.
During the 1960s-90s, the company primarily launched licensed versions of cars such as the Renault 12, renamed the Dacia 1300. Though they were notoriously unreliable, Dacias were often the only cars on the Romanian market, so locals eventually became adept at roadside fixes.During the 1960s-90s, the company primarily launched licensed versions of cars such as the Renault 12, renamed the Dacia 1300. Though they were notoriously unreliable, Dacias were often the only cars on the Romanian market, so locals eventually became adept at roadside fixes.
After the 1989 revolution, however, Dacia struggled against the tide of foreign cars entering Romania, with the brand also failing to improve on outdated designs, equipment and working conditions. “We didn’t have heating or hot meals. I worked without heat in the winter for nine years between 1990 and 1999,” says Ionela Ghenescu, 43, taking a break from her morning shift in the stamping department. After the 1989 revolution, Dacia struggled against the tide of foreign cars entering Romania, with the brand failing to improve on outdated designs, equipment and working conditions. “We didn’t have heating or hot meals. I worked without heat in the winter for nine years between 1990 and 1999,” says Ionela Ghenescu, 43, taking a break from her morning shift in the stamping department.
Like many in Mioveni, popula tion 32,000, the company is a family affair for Ghenescu: her husband and son also work at the factory. “Most people in Mioveni work for Dacia,” she says. Like many in Mioveni, population 32,000, the company is a family affair for Ghenescu: her husband and son also work at the factory. “Most people in Mioveni work for Dacia,” she says.
Sitting in his office on the outskirts of Bucharest, Nicolas Maure, the French chief executive of Dacia Romania, explains Renault’s decision to buy the company. “Dacia had an aging line up and couldn’t export any more. Volumes were falling and they were looking for a way to recover,” he says. Sitting in his office on the outskirts of Bucharest, Nicolas Maure, the French chief executive of Dacia Romania, explains Renault’s decision to buy the company. “Dacia had an ageing lineup and couldn’t export any more. Volumes were falling and they were looking for a way to recover.”
At the time, Renault was considering setting up a factory in the region, to tap into the growing markets. After failing to buy Skoda in a joint bid with Volvo, Renault bought Dacia and invested €2.2bn in updating its facilities and product line. “Originally the idea was to use the platform to deliver to the Romanian domestic market and central and eastern Europe,” says Maure. At the time, Renault was considering setting up a factory in the region, to tap into the growing markets. After failing to buy Skoda in a joint bid with Volvo, Renault bought Dacia and invested €2.2bn in updating its facilities and product line. “Originally the idea was to use the platform to deliver to the Romanian domestic market and central and eastern Europe.”
Renault’s ambitious goal was to create an entry-level car for developing markets that would retail for about €5,000, and the company focused its energy on keeping costs to a minimum, while maintaining the reliability of the final product. In 2004 it launched the Dacia Logan, which retailed for about €6,400.Renault’s ambitious goal was to create an entry-level car for developing markets that would retail for about €5,000, and the company focused its energy on keeping costs to a minimum, while maintaining the reliability of the final product. In 2004 it launched the Dacia Logan, which retailed for about €6,400.
“The initial concept was perhaps a bit dull and boring, but it did the job,” says Philippe Houchois, an analyst at UBS.“The initial concept was perhaps a bit dull and boring, but it did the job,” says Philippe Houchois, an analyst at UBS.
Between September and December 2004, Dacia sold 40,000 Logans, with Romania representing 60% of sales. However, noting demand, in 2005 the company started exporting to western Europe and seen sales grow at more than 10% a year ever since, with Romania now representing just 5% of Dacia sales, though this is also due to a weak domestic market. Between September and December 2004 Dacia sold 40,000 Logans, with Romania representing 60% of sales. However, in 2005 the company started exporting to western Europe and has seen sales grow more than 10% a year since, with Romania now representing only 5% of Dacia sales, though this is also due to a weak domestic market.
In the first eight months of 2014, sales of Dacia cars in France grew 18.9%, Italy 46.4%, Germany 7.7% and the UK by 69.7%, the company says, with new markets opening in Malta, Cyprus and across Scandinavia last year. In the first eight months of 2014 sales of Dacia cars grew in France by 18.9%, Italy 46.4%, Germany 7.7% and Britain 69.7%, the company says, with new markets opening in Malta, Cyprus and across Scandinavia last year.
Since 2004, Dacia has introduced seven more vehicles on to the market, including the Sandero, Sandero Stepway and Duster. “The Dacia Duster is the number one selling car for Renault worldwide,” says Maure. “And Mioveni is the biggest vehicle plant for Renault in terms of output.” Since 2004 Dacia has introduced seven new vehicles, including the Sandero, Sandero Stepway and Duster. “The Dacia Duster is the number one selling car for Renault worldwide,” says Maure. “And Mioveni is the biggest vehicle plant for Renault in terms of output.”
However, there are clouds on the horizon. “There is a risk of new entrants in the low-cost market,” says Houchois. “Dacia is quite critical to Renault – 45-50% of Renault is driven by their entry-level programme, and Renault can’t believe how long it’s been without competition.” However, there are clouds on the horizon. “There is a risk of new entrants in the low-cost market,” says Houchois. “Dacia is quite critical to Renault – 45%-50% of Renault is driven by their entry-level programme, and Renault can’t believe how long it’s been without competition.”
Meanwhile wages are rising in the company’s Romanian facilities. This month a new round of pay negotiations are due to begin between Dacia management and the worker’s union over wages. Wages are rising in the company’s Romanian facilities. This month a new round of pay negotiations is due to begin between Dacia management and the workers’ union.
In the past, relationships have been fractious: in March 2008, workers demanded a 50% rise, finally agreeing to 28% after a 20-day walkout.In the past, relationships have been fractious: in March 2008, workers demanded a 50% rise, finally agreeing to 28% after a 20-day walkout.
“In seven years, we have increased the wages threefold for blue-collar workers,” says Maure. “We are paying them twice as much as the average of the country; there must be a kind of slowdown on this.”“In seven years, we have increased the wages threefold for blue-collar workers,” says Maure. “We are paying them twice as much as the average of the country; there must be a kind of slowdown on this.”
In recent months, management has suggested that if wages cannot be kept down in Romania Dacia will be forced to move more of its operations to Morocco, where it set up a factory in 2012 to handle increasing demand. In recent months management has suggested that if wages cannot be kept down in Romania Dacia will be forced to move more of its operations to Morocco, where it set up a factory in 2012 to handle increasing demand.
“It is key for the Mioveni plant to remain competitive. One way is to keep the employment level, but to do so we have to moderate the wage increase. The other way is a combination of reducing output and greater automation. Option two would lead to thousands of job losses,” says Maure, who expects it to be a difficult negotiation process.“It is key for the Mioveni plant to remain competitive. One way is to keep the employment level, but to do so we have to moderate the wage increase. The other way is a combination of reducing output and greater automation. Option two would lead to thousands of job losses,” says Maure, who expects it to be a difficult negotiation process.
In the meantime, however, Dacia’s Romanian workers are enjoying the rebirth of their national brand. “Romanians have always been proud of Dacia,” says Ion Manu, 45, a maintenance worker at the Mioveni plant. He joined the company in 1987, back when Romania was still behind the Iron Curtain and Dacia cars were rarely found outside the roads of Romania. “We are really proud now it is successful overseas,” he says. In the meantime, Dacia’s Romanian workers are enjoying the rebirth of their national brand. “Romanians have always been proud of Dacia,” says Ion Manu, 45, a maintenance worker at the Mioveni plant. He joined the company in 1987, back when Romania was still behind the Iron Curtain and Dacia cars were rarely found outside the roads of Romania. “We are really proud now it is successful overseas,” he says.