Experts expect it to affect only the area of auto component exports to Germany, which represents around 1 percent of GDP, 2.9 percent of total exports.

Should the situation expand to other major automotive manufacturers in Germany or France, a larger part of Romania’s exports will be affected, including car kits and components. However, Erste does not exclude a possible decrease in Romania’s car imports should the crisis worsen, which would reduce the commercial deficit.

According to Erste, as long as the scandal stays limited to Volkswagen diesel engines, it will not have a big impact on automotive production in Central and Eastern Europe (CEE).

Over CEE, expanding scandal to other engines or other manufacturers will have temporary negative effects on the entire auto production in the region until new technologies are adopted.

CEE countries last year produced about 4 million vehicles, of which one third under Volkswagen brands, respectively Audi, Skoda, Volkswagen, Porsche and Seat. The region has an important contribution to European production of Volkswagen, every fourth car produced last year by the German automotive producer in EU being produced in a CEE country.

If the situation will be limited to Volkswagen diesel engines Type EA 189, the impact on current production likely to be quite limited, as these engines are no longer installed on new vehicles. But further investigations are yet to take place to verify whether other engines or other producers are involved in influencing pollution test results.

Meanwhile, uncertainty about demand after the serious image blow Volkswagen received could result in a more conservative formation of inventories and investment in the short term.

According to Erste, a positive result of the situation could result in a hurry to develop and deploy new technologies in the automotive sector, with CEE capacities being used for mass production.

In the CEE region, Romania, the Czech Republic, Serbia and Hungary are expected to be least affected.

In the Czech Republic, Volkswagen is the parent company of Skoda, tightly integrated into the group. It is likely that Volkswagen diesels that do not comply with pollution standards were used on some older models of Skoda. However, Skoda is unlikely to be accused directly, and Erste considers that the impact on the car industry in the Czech Republic will be quite low.

In Hungary, between all producers currently only VW Audi is associated with scandal. If Audi has to reduce production, Hungarian industry will be affected only marginally. However, if the scandal will extend to other producers, experts say Hungary could be in trouble, since one third of production is ensured by the automotive industry.

In Serbia, the automotive industry is of strategic interest, with exports of over EUR 1 billion and over 10,000 employees, the largest share being held by Fiat. The scandal should have limited effect on the country, with only a few German suppliers with sales below EUR 10 million being exposed to risks.

For countries like Poland, Slovakia, Slovenia and Croatia it is difficult to assess the damages yet, especially since the situation is still unfolding and it is not yet known how deep it will go into the industry, but effects are expected to be harsh on their economies, heavily dependent on the automotive sector in which Volkswagen held large shares.

In Poland, Volkswagen produced 175,000 vehicles last year at three plants, representing one third of the processing industry. Volkswagen is their second largest car manufacturer, where Fiat has a market share of about 50 percent and Opel holds some 20 percent.

The company had plans to open a fourth factory in Poland next year, so cut in sales could lead to production cuts or even delays in opening new units.

The Volkswagen factory in Bratislava is the largest exporter and one of the largest employers in Slovakia, with 9,900 employees. Production in Slovakia last year reached 400,000 vehicles, which were sold almost entirely overseas. Volkswagen production accounted for 40 percent of total car production, with the US being their third largest export market (11.3 percent of exports).

In Slovenia, Volkswagen is one of the most important partners for the automotive industry suppliers. Most exports go to Austria, Croatia, Hungary, France, Germany and Italy. The head of the Slovene Automotive Association said the impact of the scandal could not be assessed. However, he pointed that local suppliers had an opportunity to seize some of the market, since the industry is diversified, with over 200 companies and exports of EUR 2.9 billion.

Croatian automotive exports reach EUR 600 million and the sector employs 10,000. The impact on the Croatian market cannot be assessed exactly, according to Erste. The most important markets for the automotive Croatian are France, Germany and Italy, so that there could be a limited impact on suppliers.

Martin Winterkorn, former Volkwagen CEO who resigned on September 23, is now under criminal accusation for fraud, after 11 million Volkswagen cars were sold worldwide with a device that influenced pollution tests. (source: business-review.eu)