Although the automotive industry has been the driver of development in the Western Balkans for years, the current model based on cheap labor and foreign subsidies is running into problems
Car industry in the Western Balkans, she hits the walls of the model that once helped her grow.
Thanks to low costs and incentives for foreign investors, the region became part of the European production machinery. As the European automotive industry is in crisis, and work on electric vehicles requires more sophisticated technical knowledge, West Balkan he found himself in an unenviable situation.
Based on the data of six economic journalists from the countries of the Western Balkans, "Monitor" analyzed this branch of industry in the region.
The automotive industry of the Western Balkans has experienced a transformation in the last few years. It was a consumer market, and now it is a production base.
Factories across the region produce cables, electrical systems, metal parts, filters, upholstery, carbon fiber, plastic components, etc. Their products end up in Volkswagen, Mercedes, Audi, Stelantis and other world brands.
For more than two decades, the economic model of the region was clear. Governments competed to attract foreign direct investment through low taxes, free land, employment subsidies and infrastructure support. The Balkans offered European manufacturers what Western Europe was missing at that time: low operating costs and a relatively skilled workforce. And the proximity to the European market also helped.
Although mostly low-value links in the European supply chain, responsible for the assembly and production of individual components, the Balkan countries have benefited from this model.
As "Monitor" reports, Serbia is the largest auto industry center in the Balkans. Exports of this branch exceed four billion euros, and generate around 8,8 billion euros in total revenues.
In North Macedonia, the entire economy is largely dependent on the automotive industry. More than 57 percent of the country's total exports are related to it, as well as at least 35.000 jobs.
Bosnia and Herzegovina relies on its long-standing production tradition, dating back to the period of Yugoslavia. Albania and Kosovo are trying to find their place and invest in this sector, while Montenegro is still an observer.
In Serbia, the export of the automotive industry is directed mainly to Germany, Hungary and the Czech Republic.
The Serbian government has positioned the country as a key point in the global supply chain for multinational automotive companies, especially from the EU and, increasingly, from China. It managed to attract investments worth billions of euros.
However, recently she began to falter. It turns out that any slowdown in the German auto industry is transmitted almost instantly to the domestic economy.
The closing of the Draxlmeier and Leoni factories, which are owned by Germany, affected about 4.000 jobs.
The region produces a lot, but decides little. Technology, design and most of the profits remain mostly in the hands of foreign investors.
For years, the formula was simple and brought in investments. But, it seems, that formula is now approaching exhaustion.
Labor costs are rising, the available labor force is decreasing due to emigration and population decline. The reality is that the European car industry is slowing down.
The era of electric vehicles is further changing the rules of the game. It requires more sophisticated technology, not just manual labor – something that Balkan factories largely relied on.
This puts the region in front of a difficult choice. It can remain at the bottom of the production chain (perhaps even drop out of it altogether) or it can begin to expand its engineering capabilities. Again, the second option also requires investments.
Source: Monitor
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