SEE as a promising hub for the global automotive industry

The recently published “Southeast Europe – The New Hot Destination of the Global Automotive Industry 2018” examines several SEE countries as attractive markets for automotive investments and growing in popularity manufacturing hubs. Among them are Romania, Slovenia, Serbia, North Macedonia and Bulgaria. In the following article we will publish some of the key findings of the extensive survey.

“The automotive industry in Southeast Europe is represented by all subsectors – manufacture and distribution of passenger cars, light commercial vehicles, buses and coaches, medium-sized and heavy-duty trucks and buses, alternative fuel vehicles (hybrids and electric cars), and automotive parts and components. It is among the most rapidly expanding industries in the economies of all countries in the region in terms of contribution to the GDP, volume of production and job creation, as well as one of the leading sectors attracting FDI”, the report states.

Car manufacturing

In 2017 a total of 629 014 vehicles were manufactured in SEE, according to the International Organization of Motor Vehicle Manufacturers (OICA), SEENews informs. This represents almost 3,0% of the total European and 0,6% of the global vehicle production, with shares staying unchanged over the last three years. In 2017, however, annual growth rates of 9,7% in the region significantly exceeded the European average of 3,1% and the global average of 2,4%, statistics further say. “This can be explained with the constantly increasing demand for new cars in line with the overall sound economic growth in SEE, paired with consumers’ preference for local brands, especially in Romania, the region’s largest market. Passenger car assembly in SEE is concentrated in three countries – Romania, Slovenia and Serbia”, the survey continues.

Passenger cars are the most significant subsector of the automobile assembly industry in the region, recent research proves. Despite the presence of a number of minor bus, truck and other commercial vehicle production plants in most countries, OICA data reveals that they form close to 1,0% of the output in Serbia only. In Romania only single units of heavy-duty trucks are manufactured, while in Slovenia practically all vehicles produced are passenger cars, the report also points out.

Romania

The automotive industry in Romania consists of the two major passenger car producers, Dacia and Ford, and several others with limited production numbers, supported by more than 600 original equipment manufacturers that supply both local plants and production sites throughout Europe with automotive components, the publication reports. “The sector’s contribution was 13% of the GDP and provided jobs to more than 200 000 employees in 2017. The country is the undisputed leader in automobile manufacture in SEE, with 359 240 vehicles produced in 2017 accounting for a 57,1% share of SEE’s motor vehicles output. In terms of passenger car manufacture, the picture is similar, as they constitute more than 99% of the total vehicle manufacture in the country. However, Romania’s dominance in the regional industry fades slightly – two years ago, its share stood at 64,1%, while in 2016 it slid down to 62,7%. This is caused by the slowdown of local growth, but the introduction of Ford’s EcoSport model at the end of 2017 – the biggest investment in the automotive sector in the country over the last years – a new boost of growth is expected. Dacia exported 611 973 vehicles in 2017, or a 12% y/y increase. France remains the top export destination for the Romanian manufacturer with 119 356 units, followed by Germany with 64 918, Italy with 63 374 and Spain with 56 301. Europe has the dominant share in Dacia’s exports with 75% of all export sales in 2017, but Morocco and Algeria grow in importance and both enter among the seven largest markets for Dacia”, the extensive study states.

Romania concentrates on production of low-budget cars and has gained considerable share in two segments of the global market - customers in the SEE region and other emerging markets with lower incomes, and customers in Germany, France, Spain and other Western European countries with a preference for low-budget cars, statistics also show.

Romanian components production

According to the Romanian Investment Agency, both production and exports of components have doubled in value within five years. Export grows faster than production, which is a sign of the increasing competitiveness of Romanian auto component makers on the international markets. The country acts as an automotive industry hub in the region with easy access to major markets such as Western Europe, Russia, Poland, Ukraine and Turkey.

Romania specialises in the manufacture of tyres, cables, conductors, plastic and rubber components, bearings and transmission components, electronics, batteries, safety systems and optical devices. More than 270 companies were active in the automotive components sector in Slovenia as of end-2016, employing more than 16 000 people.

“More than 90% of the sector’s output was exported, with half of it going to assembly plants in Germany to clients like Audi, BMW, Mercedes Benz, Volkswagen and Ford. The rest was exported to France, Italy, Austria, the UK, the USA, Hungary, Mexico and Romania. The country specialises in the manufacture of car body parts, steering system and drive components, seats and covers, braking systems, exhaust systems, engine and gearbox components and electronic components”, SEENews adds.

Serbia

Serbia’s automotive industry is considered the most important and promising industrial sector in the country, SEENews reports and adds: “In 2017 it employed more than 40 000 workers, accounted for 14% of the FDI and contributed 10% to the country’s exports. The major driver of the sector is Fiat’s plant in Kragujevac, Central Serbia, launched in 2008, where the Fiat 500L is assembled. The Italian car maker invested a total of EUR 980 mln in the production, co-financed by the Serbian state, according to local government investment support agency SIEPA”.

Another local manufacturer is Ikarbus. It produces buses and coaches sold mainly on the domestic market, with a small share exported to Russia. In 2017 close to 80 000 passenger cars were manufactured, which represents only half of the annual capacity of Fiat’s plant. “Serbia was the only passenger car-producing nation in SEE not to report an increase in its output compared to 2016. This can be explained by the comparatively low demand on the domestic market, where most Fiat 500L cars are sold – Serbia had the lowest annual growth in car sales among the major SEE national markets in 2017”, the research adds. The automotive industry – a priority sector in the country, can rely on the government’s ambition to attract global strategic partners to establish new production or revive suffering and non-functional plants in the country, research results show.

Serbia’s automotive components sector

Serbia’s automotive components subsector accounted for more than half of the total value of the automotive industry’s output in 2015, according to the Serbian Business Registers Agency and Serbian Development Agency. “The most important product categories produced in Serbia include tyres, wiring harness, casted parts, plastic parts, rubber hoses, seats and seat covers and other body parts. The components subsector in Serbia is represented by more than 70 companies, providing jobs to 40 000 employees. Approximately 20% of the workers are employed in entirely local companies, while the rest work in automotive components plants of global manufacturers, mainly from Germany, South Korea, Italy, France, Slovenia and the USA”, the cited report informs.

An important characteristic of Serbia’s car parts subsector is its extremely uniform geographical allocation, which covers all parts of the country. Kragujevac is a distinguished centre with more than 10 suppliers headquartered around the Fiat plant, SEENews further adds.

Slovenia

Slovenia’s passenger car production soared in 2017, which was its strongest year since 2010, official data shows. “A total of 189852 units were manufactured, up 42,0% on year. Slovenia thus accounted for 30,2% of passenger car production in SEE, ranking second behind Romania, and making up 1,0% of all cars manufactured in Europe. Slovenia’s automotive industry generated 10% of the country’s GDP and 12,5% of its export of goods”, the study continues.

Revoz is Slovenia’s leading motor vehicles manufacturer in terms of total revenue and number of units produced. The company has been owned by Renault and has produced models under the French brand since 2004. It sells its output both on the domestic market and abroad, the top export destinations being France, Germany and the UK.

North Macedonia

“Despite the lack of motor vehicles assembly plants in North Macedonia, the automotive sector enjoys dynamic development and growing importance for the country’s economy”, SEENews concludes. The Automotive Cluster of North Macedonia lists catalytic converters, safety systems, seat belts, airbags, electronic controllers and sensors, precision engineered and plastic products and casting components as the products in which the country specialises. As of 2017, more than 50 companies carried out production activities in the country, mainly for clients in Germany and Serbia with a combined 40% share in Macedonia’s automotive components exports.

Bulgaria

“Automobile assembly in Bulgaria has a long tradition of unsuccessful attempts by international car manufacturers, such as Fiat and Renault. The latest attempt collapsed at the beginning of 2017, when Chinese car maker Great Wall stopped operations at its plant in Lovech, North-western Bulgaria, and filed for bankruptcy with many of its already produced vehicles remaining unsold”, SEENews points out as a negative trend in the country.
The Great Wall plant launched in 2012, with an annual production capacity of 50 000 units that was never reached. The manufacturer’s main markets included Bulgaria, Romania, Serbia and Macedonia.

Given the widening base of automotive component suppliers in the country and the formation of automotive cluster, the automotive industry has been declared a priority sector by the government. In February 2018 the government stated its intention of attracting a global automobile manufacturer to carry out its production activity in Bulgaria. The first talks were held with car makers from Germany and the UK (BMW Group, according to InvestBulgaria Agency), followed by manufacturers from South Korea and India, the publication reveals.

Automotive components industry in Bulgaria

According to Automotive Cluster Bulgaria and the Ministry of Economy, in 2017 the automotive components industry in Bulgaria was represented by 170 companies with more than 40 000 employees, which contributed 4,0% to Bulgaria’s GDP. The combined total revenue of the companies in the sector stood at EUR 3,5 bln, of which 90% from exports to major international car makers.

A survey by Automotive Cluster Bulgaria and consultancies Colliers International and PricewaterhouseCoopers Bulgaria in 2017 showed that 85% of the automotive components producers operating in Bulgaria plan to expand their activities in the country. “A positive trend is that the share of suppliers with own research and development activities in Bulgaria grows constantly and exceeded 40% in 2017. The number of employees is expected to double in the next four years, given the plans announced by international automotive companies to enter or expand their already existing activities in Bulgaria”, the SEE media reports.

The factors for the rapid growth, in comparison to the other countries in SEE, are: comparatively late launch of the industry in Bulgaria and low starting point lead to the higher growth rate. Other factors are the presence of a developed IT sector in the country, which enables the creation of highly innovative products and solutions in the automotive industry. “More than half of the FDI in Bulgaria in the last years are in the automotive sector. Since 2005, a total of EUR 400 mln have been invested in 20 automotive industry projects certified under the Investment Promotion Act. The prime location of the sector in Bulgaria is the Trakia Economic Zone near Plovdiv in Central Southern Bulgaria, where more than 10 automotive parts suppliers have their production facilities. Other major locations are the capital, Sofia, and Ruse and Pleven in northern Bulgaria, as well as the whole region of South-eastern Bulgaria”, the survey further adds.

SEE parts and components production

The automobile parts and components subsector is more widely represented in SEE than automobile production and assembly, the research points out. A network of component suppliers for all major car manufacturers in Europe has developed throughout SEE – Romania, Slovenia and Serbia are already established as leaders, and Bulgaria, Macedonia, Croatia, and even Moldova and Bosnia and Herzegovina have clusters of automotive companies. The factors underlying the region’s development as a preferred destination for multinational automotive companies to locate their production sites include: the cost-competitive environment, access to a qualified workforce with engineering and technical skills, and the well-developed IT and supporting industries, statistics show.

“The geographical proximity to big manufacturers within SEE, as well as in Central Europe and Turkey, which are among the European leaders in automobile assembly, ensures competitive advantage in terms of low distribution costs and just-in-time delivery”, SEENews continues.

International Trade Centre data shows that exports of parts and accessories for motor vehicles has steadily grown each year between 2013 and 2016 in all SEE countries, except Montenegro and Kosovo. The average annual growth rate in the region stood at 18,1% in 2016. Macedonia and Moldova more than doubled the value of their automotive component exports within a year, while Albania, Bulgaria, Romania and Slovenia posted double-digit growth rates. “In 2016 Romania generated automotive component exports of EUR 5 348 bln, or 77,4% of the region’s total exports in the sector. Slovenia and Serbia followed with EUR 963,3 mln and EUR 171,4 mln, respectively, while Bulgaria reported exports of EUR 94,7 mln. Romania has the largest in size and importance automotive components subsector in SEE, consisting of more than 600 suppliers. Its development is boosted by the presence of major passenger car assembly plants in the country”, the extensive report results state.

Source: “Southeast Europe – The New Hot Destination of the Global Automotive Industry” 2018 report by SEENews