The automotive sector is growing. Romania’s strengths

30.03.2016

Slowly but surely, Romania has in recent years become a key investment location on the European map worth of being taken into consideration for “greenfield” investments or investments aimed at expanding production and service capacities. Besides the IT sector, which records significant growth every year, the automotive industry is also proving that it can be one of the stable engines fuelling the development of the Romanian economy.

“Most of the companies active in the automotive industry which Noerr has had the pleasure of advising have developed their activities or have concrete plans to increase their production capacities,” states Noerr partner Rusandra Sandu. This trend exists parallel to the requirements of the automotive market to reduce production costs in a climate dominated by competition and increased efficiency.

Romania therefore remains a top choice of multinational companies when taking decisions on expanding business or relocating production capacities due to the cost pressure. The companies assisted by Noerr have carried out complex analyses to facilitate the selection of the best investment location. “We know that among the strengths taken into account when choosing Romania is the relatively easy – from a corporate perspective – incorporation of a new business in Romania, the low taxation level compared to other EU countries and the – still – cheap workforce at a more and more increased level of competition amongst employees,” adds Rusandra Sandu.

One of the key factors in the location selection process is the financial support, in the form of the State aid, which the authorities are willing to offer to attract investment. Thus, starting in 2008, by means of the State aid schemes for stimulating investments with a major impact on the economy and the creation of jobs, investment projects with a total value of EUR 1.63 billion (eligible and non-eligible costs) have been approved for State aid to the tune of approximately EUR 588 million in total. The automotive sector leads by far as the sector receiving the most State aid, more than 50% of the approved projects being implemented by companies from this sector. Companies like Daimler, Bosch Rexroth, Leoni Wiring, Continental and Valeo are just a few of the companies which have realised the possibility of receiving non-refundable financing of up to 50% of the total value of the investment made.

“With its “Greenfield” and “State Aid” practices developed in recent years for the automotive segment by the integrated “Legal, Tax & Finance” services within the Automotive Group, Noerr continuously promotes the State aid schemes among its clients,” states Iulian Sorescu, Associated Partner and Financial Advisor at Noerr.

Currently, the companies active in the field of production can submit applications for obtaining State aid for investment projects with a minimum value of EUR 10 million, and can benefit from State aid of up to 50% of the eligible costs (construction and production equipment). Similarly, companies creating jobs can benefit from the same financing percentage for salary costs for a two-year period. The budget for the State aid schemes is currently being revised, with authorities wanting to increase it from EUR 600 million to EUR 870 million, designed to attract productive investments, and EUR 600 million to create jobs. The budgets are valid for the period 2015-2020.

“We are certainly glad that Noerr is one of the best advisors (legal, tax, finance) in the automotive segment and that we have partners who, in the coming period, will increase their production capacities, several of them fulfilling the criterion of the minimum value of EUR 10 million in order to benefit from State aid,” mentions Iulian Sorescu.

We hope that the automotive industry will continue its growth trend at global level and that Romania will be able to benefit from these investments. In recent years, component suppliers have been reporting strong development. What seems to be missing is the market entry of a third producer of motor vehicles; this would be a desirable and, most likely, significant “boost” for the Romanian automotive industry.