So says BMI in a new report entitled “Czech Republic Autos Report Q1 2012”.

In the report, available through companiesandmarkets.com, BMI comments that although it sees a significant improvement in consumer demand from 2012, it does not anticipate a complete recovery in sales to pre-crisis levels until 2013 and as such has revised its 2012 forecast to a decline in passenger car sales. 

It adds that a number of factors are slowing the recovery in vehicle demand. Unemployment continues to be high, with the latest figures from Eurostat showing it stood at 7.2% in March. Although this is an improvement on the 9.6% rate recorded in December, BMI's Macroeconomic team expects the rate to average 8.4% in 2011, which will undoubtedly act as a drag on domestic demand for vehicles.

Estimates from the country's Automotive Industry Association (AIA) show that car production in the Czech Republic grew a robust 11.4% year-on-year to 895,728 units during the first three quarters of 2011. BMI believes that the better-than-expected growth came on the back of robust import demand from Germany, which is the destination for a large proportion of Czech-made vehicles. 

However, it says that it believes that the momentum is unlikely to be sustained during the remainder of 2011 and in 2012, amid fears of a slowdown in German growth. It has accordingly stepped up its 2011 production growth forecast to just over 9% year-on-year. 

In 2012, BMI expects production to grow at a modest 5.4%, which it believes will come on the back of the ongoing recovery in the emerging European markets, rather than in the Czech Republic's traditional export partner. A bright spot for the Czech production segment, however, lies in the fact that much of the production is of small cars – a segment that BMI believes will outperform broader passenger cars sales.