Automotive industry in Serbia
The automotive industry in Serbia dates back to 1939 when the first trucks came off the assembly lines in the city of Kragujevac. After the Second World War, this factory was renamed Zastava and it started producing motor vehicles under the licence and quality standards of FIAT. This was a booming period for automotive suppliers in Serbia, as many component manufacturers were needed to support the growing new industry.
High quality production enabled them to work for other western car manufacturers. Soon, companies like Mercedes, Ford, PSA and Opel were sourcing automotive components from Serbian companies. The high point of this industry came in 1989 when Zastava produced roughly 250,000 cars. Zastava cars were exported to 70 countries all over the world, including the UK and USA. The political problems and economic sanctions imposed on Serbia during the 1990s halted the development of this export oriented sector.
The break-up of former Yugoslavia had a big impact on Zastava’s existing supply chain, and economic sanctions left it with a severely depleted market. Serbian suppliers faced the same problems: The industry was confined to more or less serving only the Serbian market and reduced profits prevented companies from investing in the development of technologies. Since 2000, the Serbian automotive industry has rapidly re-emerged due to the privatization process, a strong influx of foreign capital, and government support.
OEM’s and component suppliers in Serbia
In 2009, the automotive industry in Serbia consisted of six companies manufacturing motor vehicles and around 70 component suppliers. The largest vehicle manufacturer is former Zastava Automobili or, as it is known now, the FIAT Serbia company.
The production range of Serbian vehicle manufacturers consists of passenger and commercial cars; and light, medium and heavy trucks and buses. Serbia also has companies that produce trailers, semi trailers or vehicle superstructures. Today, ca. 100 companies with 25,000 employees are producing parts and systems for motor vehicles in Serbia.
Engine & engine component manufacturing is the most popular activity within the automotive component production industry in Serbia. These products encompass valves, camshafts, crankshafts, connecting rods, flywheels, etc. Production of complete engines has dropped with the drop in production of Zastava cars and the industry is now focused on components rather than assembly. However, these engine components are mostly produced for foreign OEMs with a smaller percentage destined for the spare parts market, suggesting high product quality.
Vehicle plastic and rubber parts are the second most popular only after engine components in the automotive component production in Serbia. Rubber components include chiefly hoses, rubber brackets and weather seals, while plastic is used in a wide range of interior and exterior parts. It should be noted that the survey did not include tyres within the plastic and rubber product group, but as part of chassis systems.
There is little foreign capital present in plastic & rubber production, making it a favourite product group for domestic companies. Electrical, electronic & power supply production is also very significant. These products include car batteries, electric motors and wire harnesses. It is worth noting that the majority of wire harness producers are foreign-owned companies founded in the last decade. Production of braking system parts is very diverse and covers brake discs and drums, brake pads, hydraulic systems for braking systems, hydraulic brake hoses etc.
Production of brake discs and drums is most popular, and foreign capital is strongly present there. These parts are produced by casting and machining, which, together with wire harness production, is technology that has seen the most foreign investment in the Serbian automotive sector in the past three years.
Turnover and exports
Many new companies have entered the automotive component production sector in Serbia since 2005. All of these companies are foreign investors and their establishment has led to rapid growth in sector turnover. Total turnover rose from 360 million EUR in 2006 to 460 million EUR in 2007, and 830 million EUR in 2008. Domestic companies’ turnover is also constantly growing, but not as rapidly as with foreign owned companies. Very little domestic capital was invested in new companies and the majority of domestic companies’ turnover growth is down to the increase in existing production.
Parallel to the turnover, the level of exports is steadily rising. Foreign-owned companies are main leaders in this category, especially since almost all of them have invested in Serbia for exporting purposes. The reason for this lies in the excellent export conditions that Serbia offers, due to its convenient location and free trade agreements with all European countries and Russia. The survey demonstrates that more than 90% of foreign companies’ production is exported, while domestic companies export around 45%. Domestic companies clearly focus more on local demand, while foreign-owned companies focus on exports.
FIAT’s arrival in Serbia, with production plans for 300,000 vehicles a year, certainly shifted foreign investors’ interest from predominantly export production to supplying local vehicle production as well. One of the biggest exporters in Serbia is Tigar Tyres, owned by French Michelin - the company exports 90% to the European Union.
The primary export destination for automotive parts produced in Serbia is the European Union, and the survey conducted by ACSEE shows that 90% of companies export to the EU. The European Union is a very large market for automotive parts, and Serbia has the advantage of geographically bordering three EU countries and having exceptional trade measures, enabling the export of all products originating from Serbia to enter EU without customs or other fees.
The second largest export destination, with 60% of automotive companies exporting there, are the countries of former Yugoslavia. The export to these countries is predominantly based on the spare parts market. The strong presence of Serbian parts in these markets is due to the fact that many vehicles driven there originate from Serbian vehicle manufacturers.
Although many producers export to these countries, the real volume of export is not that large. Under the free trade agreement, automotive parts and systems can be exported from Serbia to Russia duty free, although Russia comes only fourth as an export destination, with 31% of companies exporting there.
Company and structure
48% of companies in the sector are large companies. Medium-sized companies form 38% of the sector and small companies only 14%. Foreign Greenfield investments play a big part in medium-sized companies, suggesting that this is the preferred scheme when Greenfield FDI is at stake. Large companies are those that tend to have been around for longer and have been privatized or are in the process of privatization.
The majority of companies in the sector are domestically owned, with an ownership ratio of 66% for the domestically-owned companies and 34% for the foreign ones. Slovenian companies are the biggest foreign investors in the Serbian automotive components sector, with a 10% presence on the market. German companies are next with a 7% ownership, followed by French companies with a 6%.
Every year, around 13,000 students graduate from universities in Serbia, where one-third comes from technical universities. Blue collar workers come from various technical secondary schools. In total there are 71 of such schools in Serbia, offering a number of specializations. These workers also receive specific know-how and hands-on experience related to technology and quality standards in the automotive industry.
Major automotive industry representatives in Serbia
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