East Europe Uses West's Auto Kits

IN East Europe the wave of the future - the near future, anyway - is the "kit car."

Western automobile manufacturers send fully assembled car pieces, such as transmissions and engines, into screwdriver assembly plants in countries like Poland and Czecho- slovakia. Cheap labor there takes these "kit" parts and puts them together.

The practice was born out of necessity. Many East European countries have slapped sky-high tariffs on Western car imports, including used cars, because their countries were being invaded by Western brands. Poland, for instance, has erected 35 percent tariffs against Western car imports.

Companies such as General Motors, Volkswagen, and Peugeot have either set up or are planning kit arrangements. East Europe is a market which has much potential but is only slowly developing.

"It's financially more viable to assemble locally," says Louis Bailoni, of DRI/McGraw-Hill's automotive study group in London. Mr. Bailoni gives the kit-car method a five- to seven-year life span, depending on how long East European markets stay protected.

According to DRI/McGraw-Hill, production of cars in East Europe will increase by nearly 50 percent by 1996, from 1.7 million to 2.5 million cars. The former Soviet Union accounts for roughly half the output. By comparison, the forecast for Western Europe is 15 million cars in 1996.

While Western carmakers are setting up manufacturing in Central Europe, they won't touch Russia, which is "a mess," as Bailoni puts it.

One East European car that Americans might remember - the $3,999 Yugo - is now a no-go. Since its 1986 debut in the United States, sales have been poor and it was withdrawn this year. Meanwhile, the Yugoslav war and United Nations trade embargo have halted the assembly line in Serbia.