Automotive components production in North Macedonia
• Machines • Technical Articles • South-East European INDUSTRIAL Мarket - issue 2/2021 • 21.07.2021
With nearly 30 000 employees in numerous established companies contributing approximately 40% to annual exports, North Macedonia has become a key manufacturing location in Eastern Europe for first and second tier suppliers to the automotive components industry. North Macedonia´s economic policies provide an attractive business environment in the region and the country displays high potential as a source of competitively priced components to the automotive industry.
Investors in North Macedonia´s free zones enjoy 100% foreign ownership, 0% corporate and income tax, return of 10% of investment costs in construction, machines, and equipment, EUR 0,1 per mІ/year land lease rates, job creation grants, as well as fully developed and available infrastructure, which allows a quick start of operations.
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The existing engineering and manufacturing traditions in North Macedonia have enabled the automotive components industry to continually develop. The production of automotive components, dating back from the 1960s for the then Zastava car plant, licensed under Fiat, has reprofiled and modernized today with the entry of a number of multinational companies and tier 1 and tier 2 suppliers, in North Macedonia. Companies like Aptiv, Adient, Lear, Johnson Matthey, Joyson Safety Systems, Amphenol, Kostal, Draexlmaier Gentherm, Kemet, Van Hool, Kromberg & Schubert, Marquardt, Dura, and many others, have set up large export-oriented production facilities in the country and several have already reinvested multiple times.
Likewise, recent years have witnessed a number of successful smaller local and foreign ventures in this sector, creating opportunities for further development. Cost-competitive environment, well established aftercare system, free trade access to Europe, and development of infrastructure have made North Macedonia a destination for investment. Additionally, the existence of local supplier base and its ongoing development is creating opportunities for supply chain linkages and local company cooperation.
Current situation in automation components manufacturing
The automotive industry has a very important role for the Macedonian economy in terms of its exports. The automotive companies are largely integrated into the supply chains of the European automotive industry. These are companies that are mostly export-oriented and have a large share in the country´s exports.
Prior to the pandemic, the automotive industry was booming in recent years, and it could be credited with increasing exports, creating new jobs and attracting investments. Through these companies manufacturing automotive components, Macedonian economy in recent years has become much more deeply integrated into global supply chains, but also completely changed the export structure, especially in favor of products with high added value.
In 2019, automotive components worth EUR 130 million were exported from the country, which is an increase of 5,6% from the previous 2018. According to the latest data from the State Statistical Office, 65% of the total exports of the country in January 2021 were made by companies in the automotive industry.
Most automotive components are exported to Romania, Germany, Hungary, Slovenia, Mexico and Brazil. Data from the State Statistical Office shows that exports of automotive components are increasing every year. The country´s existing manufacturers supply European, Russian, Turkish and African markets.
The automotive industry in these markets is particularly active as global players have invested over EUR 20 billion in car production in Central and Eastern Europe over the last ten years. The quality products produced in these factories, in accordance with the highest automotive standards, assure that the production in the Macedonian sector for automotive components has huge export potential.
These companies have large global reach, exporting to Europe, Russia, Turkey, Africa and around the globe, encompassing a duty-free market of over 650 million customers resulting from three multilateral trade agreements (SAA with EU, EFTA with Switzerland, Norway, Iceland and Liechtenstein and CEFTA with the rest of the Western Balkans) and two bilateral agreements with Turkey and Ukraine. North Macedonia´s location allows to deliver to these regions quickly, taking less than a day to Central and Eastern Europe and Turkey and two days maximum to Western Europe.
Automotive components manufacturing perspectives
North Macedonia has a history of automotive components manufacturing, which started in the 1960s initially to supply the former Yugoslavian automotive producer Zastava. Today, the automotive components sector is compiled of a number of companies. The country is particularly suitable as a location for the manufacture of high value to weight and labor-intensive products such as safety systems, electronics, mechatronics, precision engineered and plastic products, and die-casting components. In the recent privatization process, a number of companies have been bought by investors and continue to produce a range of components for cars, buses, trucks and locomotives.
Investors in North Macedonia can freely export to a market of over 650 million people. North Macedonia offers a particularly cost-competitive operating environment for auto component manufacturing. The labor force is well educated and flexible. The educational system is willing to collaborate with incoming investors in finding ways to meet their skill needs.
Companies like Johnson Matthey, Kromberg & Schubert, Amphenol Technology, Marquardt, Tab Mak, Joyson Safety Systems, Draexslmaier, Gentherm, Lear Corporation, Kostal, Adient, ARC Automotive, Lth Learnica, Adient Automotive, Aptiv, ODW Elektrik, Accomplast, Kablo, Murat Ticaret, Dura Automotive Systems and many others have set up large export-oriented production facilities in the country and have already reinvested several times. Also, in recent years the country has witnessed a number of successful smaller local and foreign ventures in this sector, creating opportunities for further development. Further below we have collected summarised information on major automotive investors to form a comprehensive picture of the current manufacture situation in North Macedonia.
Adient is a global leader in automotive seating production. In 2017 it opened its new plant for production of automotive seating covers, situated in the technologically developing zone in Strumica.
The new plant has an area of 12 500 mІ and it is equipped with state-of-the-art technology for production of automotive seating covers, predominantly intended for the needs of customers in the European market. The initial investment amounts to more than USD 20 million for building the greenfield plant. Adient employs 1300 people, additionally confirming its strong commitment to investing in the North Macedonian economy.
Former Delphi Automotive, the US company decided to invest EUR 15 million in the Skopje 1 free zone in December of 2015, and currently employs 500 people. The plant produces electronic control technologies for vehicle manufacturers across Europe and works closely with its other facilities in the region to ensure efficiency and flexibility for its customers.
The company´s decision to invest in North Macedonia was based on certain criteria, namely following the group´s vehicle-maker customers, access to a skilled workforce, use of existing infrastructure, and partnership potential with local government.
In March 2017, Delphi Automotive split its business into two independent companies – Delphi Technologies and Aptiv. Delphi renamed a part of its business focused on automated driving and electrification, calling the new entity Aptiv, which formalized the separation of that aspect of its company from the segment focused on more traditional engines.
Delphi Automotive is among the top 15 largest global suppliers of the automotive industry with an annual turnover of over EUR 17 billion. It has 146 000 employees worldwide with 126 production plants and is operational in over 33 countries.
Draexlmaier Group is an international supplier to the automotive industry with more than 60 factories in more than 20 countries around the world. Headquartered in Germany, the company today employs around 75 000 people worldwide.
DMM Draexlmaier Macedonia was founded in 2012 by Draexlmaier Group. In North Macedonia, cable sets (complete electrical systems) for the automotive industry are produced at the request of the client. Since its establishment, the Draexlmaier factory in Kavadarci has experienced impressive development. Today it is one of the largest employers in the country.
DAA Draexlmaier Automotive of America LLC is a wholly owned subsidiary of the Draexlmaier Group of Germany. The company´s main lines of business include interior components, cockpits, wiring harness and electrical management systems. Customers in North America include BMW, General Motors/Cadillac and Volkswagen.
On April 6 2021 Draexlmaier opened a new production plant in Kumanovo, in the northern part of North Macedonia, its second in the country. The company employs over 700 people in the new plant and plans to increase the headcount. Worldwide, Draexlmaier operates more than 65 factories in over 20 countries. The company employs more than 75 000 people.
The U.S. based Gentherm Corporation is recognized by the largest automotive industry manufacturers as a dependable and outstanding supplier of heated seating, climate seating, electronics, and cables. It produces equipment that is installed in dozens of vehicle models by companies such as Ford, General Motors, Toyota, Lexus, and Kia. They have locations in 11 countries, and more than 5000 employees worldwide.
In December 2014, Gentherm Corporation announced it will invest EUR 20 million in a new plant in the Prilep free zone and employ approximately 2000 people. The new facility opened in 2016 and is dedicated to the production of the full line of Gentherm seat comfort and industrial products. As of the start of 2018, 1500 people were employed. This figure is projected to reach up to 2000 people.
British company Johnson Matthey is a world-leading catalyst manufacturer for vehicle and stationary exhaust emission control and a leader in catalytic systems. The company offers modern mobile emission control products and services, such as diesel oxidation catalysts (DOC), active DPF with burner assistant regeneration (DPF-BU), etc.
Johnson Matthey has operations in over 30 countries and employs around 12 000 people. One-third of all new cars worldwide are fitted with a Johnson Matthey autocatalysts. The factory in Skopje generates USD 2,07 billion in sales. There are 198 companies in the Johnson Matthey D.O.O.E.L. corporate family.
The company chose North Macedonia for its European mega-factory for emission control catalysts in competition with 13 other countries in the region, including the Czech Republic, Hungary and Slovakia. Johnson Matthey’s plant in the Skopje 1 free zone is the single largest investment project and the most sophisticated and advanced Johnson Matthey plant in the world. The company is also considered the largest exporter in North Macedonia. The investment is worth EUR 80 million and the initial number of employees was 350.
On May 9, 2012, Johnson Matthey marked a major expansion project in North Macedonia with the construction of a second plant located in Skopje 1 free zone. This investment was worth EUR 65 million. It doubled the production and created additional 500 jobs. As a result of Johnson Matthey´s expansion, the total number of employees reached 878 at the start of the 2018.
Joyson Safety Systems
Joyson Safety Systems (JSS), formerly known as Key Safety Systems (KSS), is a Chinese-owned company that develops and manufactures automotive safety systems. The company is a result of the merger between KSS and Takata Corporation after KSS acquired Takata. The company headquarters is in Auburn Hills, Michigan, in the United States. Joyson Safety Systems chose North Macedonia in 2014 for its production expansion in Europe. The size of the investment is worth EUR 15 million, and the company initially began with the production of airbag cushions and modules.
The global supplier of advanced automotive safety-critical components and systems started operating in an existing facility in Kicevo as a brownfield investment in 2015, and from 2016 continued production in a greenfield facility in the Kicevo free zone with an area of 13 600 mІ.
JSS is owned by Ningbo Joyson Electronic, and is described as a “Chinese automotive conglomerate” that acquired Key Safety Systems in 2016. The company is a world leader in the design, development, and manufacture of inflators, airbags, steering wheels, and seat belts. Globally, they have an international network of 34 sales, design, and manufacturing facilities employing approximately 50 000 people worldwide. At the start of 2018, 1426 people were employed in the Kicevo free zone, and this figure is projected to reach up to 2000 people.
The German company Kostal is a global leader in the supply of technologically advanced electronic, electromechanical, and mechatronic products for major industrial organizations. Kostal is present at 42 locations on 5 continents and counts a staff of over 18 000 people.
In December 2014, Germany´s Kostal announced plans for increasing its production capacity in Europe through an investment in Macedonia. The company began with a brownfield investment in October 2016, in former EMO in Ohrid, with a production facility on 25 000 m2. The clients of Kostal are famous brands from the automotive industry such BMW, Daimler, Porsche, Tesla, Rolls Royce, Bentley.
At the start of the 2018 calendar year, 221 people were employed and this number is expected to reach 1000. In the future, a significant expansion of production and a total investment of EUR 70 million are expected.
Kromberg & Schubert
Kromberg & Schubert focuses on the development and production of complex wiring systems for the automotive industry. In addition, plastic parts are currently produced. With over 50 000 employees at over 40 locations, Kromberg & Schubert is today one of the global leaders in the supply of electrical systems, cables and plastic components.
Today, Kromberg & Schubert supplies all major automotive manufacturers (OEMs) with a diverse range of electrical systems for cars as well as for motorbikes and utility vehicles: main, engine, cockpit, door, audio, air conditioning and communication harnesses, battery cables as well as overmoulded cable harness modules. This also includes the integration of a number of components into an overall system.
Using the latest technologies and software tools, Kromberg & Schubert simulates an application of the electrical systems during the development to correspond to the individual customer requirements.
American company Lear Corporation invested over EUR 15 million in Macedonia´s Tetovo free zone on an area encompassing 12 000 mІ. The company uses state-of-the-art machinery and production facilities for cutting leather and canvas, including a contemporary warehouse and office space. At the start of 2018, employees at Lear Corporation´s plant in the Tetovo free zone numbered 1390, however through the planned expansion of an additional 8000 mІ, this figure is planned to reach 3000.
Lear Corporation is a leading global supplier of automotive seating and electrical distribution systems. Lear´s world-class products are designed, engineered and manufactured by a diverse team of 132 000 employees at 235 facilities in 34 countries around the globe.
The company TAB d.d. was established in 1965 as a subsidiary of the Mezica Holding Mine Company in an area where they have been dealing with lead for over 350 years. For the first 15 years, the company was a licensed partner of Tudor from Sweden. Today, TAB manufactures a wide range of lead-acid, VRLA AGM and VRLA gel batteries and accumulators in three factories with over 700 employees.
Keywords: North Macedonia, automotive, manufacture, components, automotive industry
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