The company is now positioning itself to take advantage of Romania’s relatively low wages to use its Dacia plant as an export platform to neighboring East European countries such as Bulgaria, Belarus, and mostly Ukraine. Production would be ramped up by 25,000 vehicles over the next five years.

a. For its newly mounted exports push, Dacia is targeting Ukraine, where ZAZ—the Ukrainian car company—accounts for more than 50 percent of the market. Do you believe that Dacia is well-positioned to penetrate the Ukrainian automobile market? Ukraine is recording an annual rate of inflation of 15 percent over the past five years, but the Ukrainian hryvnia is on a free float and generally considered to be fairly valued. Spell out the macroeconomic conditions for successful entry.

b. Skoda—the low-cost subsidiary of the German automotive firm Volkswagen

(VW)—is the #2 brand sold in the Ukraine, accounting for 20 percent of the market. Skoda’s subcompact, the Yeti, is currently manufactured in Slovakia, which joined the euro-zone on January 1, 2009. Compare Dacia’s potential for success with that of Skoda. What is your assessment of Renault-Dacia’s currency exposure in its export sales to Ukraine?