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ITALY'S AUTOMOTIVE INDUSTRY IS BACK ON THE ROAD THANKS TO EXPORTS
2,131 firms employing nearly 250,000 persons with turnovers of 38.3 billion euros in 2006: these are the figures for the Italian automotive components industry which has managed to overcome the crisis that Fiat - Italy's major car producer - succumbed to in the early 2000s, through concentrating once again on exports. Even if it remains the industry's biggest client, the dependence on Fiat has decreased slightly over the last year: these days 42% of Italian automotive components firms are completely independent from the Italian car giant.
The 2007 edition of the Italian Observatory on the Automotive Components Industry (www.to.camcom.it/osservatoriocomponentisticautoveicolare) - a yearly report published by the Turin Chamber of Commerce on 789 firms operating in all sectors of the industry - points to a marked upswing for the industry: in 2006 revenues grew on average by 9% compared to 2005. Growth was particularly robust for the systems sector (+11.4%) while it was below par only for subcontractors. Yet they still managed to register an increase of 6.7% compared to the previous year.
"The increase in turnover shows that the automotive sector is not just one of the most important national manufacturing industries, but also that it has found the key to success on the international markets", claims Alessandro Barberis, President of the Turin Chamber of Commerce. The propensity to export is, in fact, one of the defining characteristics of this industry, whose firms sell abroad in 72% of cases. In 2006 the trade balance for the 'motor vehicles and engines parts and accessories' sector showed a 5.5 billion euro surplus.
The main destination for exports is Western Europe, followed by Central Europe, which in the last year has replaced the United States as the second most favoured market for Italian automotive products. In the last three years Italian firms have developed trade links mainly in Western Europe (39% of cases), Eastern Europe (21%) and Asia (20%).
Italian firms in this sector, therefore, have successfully internationalised their operations towards Asia, even though the Far East is where their fiercest competitors originate. The fact that in the last year the trade deficits in the automotive sector with Japan, Taiwan and China have increased is testimony to this.
Small firms - those whose annual turnover is less than 10 million euros - form the backbone of the Italian automotive industry, and represent 65% of the total number of firms that operate in this sector. Such fragmentation, in theory, is an obstacle to internationalisation, as a critical mass needs to be reached before starting to export. Yet the threshold is lowering. "If size had been an issue for the Italian automotive industry, we would not find so many firms on the global scene. There is a group of them that is leading the way", says Roberto Russo, one of the authors of the Observatory, which was compiled by Step, an economic consulting firm. Yet exporting is an option only for firms over a certain level. "Sub-contractors, for example, necessarily work on a local basis. Yet the direction of investments towards China and the rest of Asia shows that those who have the resources to do it are actually internationalising. Anyhow, space is limited: if there were too many 'giants' targeting the same market, they would end up squeezing each others' profits".
Lastly, 2006 also saw a significant increase in the tendency of the industry to strengthen its ties with the research sector. "55% of the sample interviewed in the Observatory have invested at least 2% of their turnover into R&D", claims Mr Barberis. "There is one other piece of good news - he adds. "Relations with the academic sector finally seem to be blossoming as well: 92 firms have already started R&D projects with Universities".
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