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automotiveindustry

serbia

aboutserbiatheroots

theindustrytodaykeycomponentsuppliers

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taxincentivestradeunlimited

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Republic of Serbia

TIMEZONE

1h

2h

3h

88,361 km2

Temperate continental, with monthly average temperatures ranging between 0.7°C in January and 17.5°C in July

Major Cities:Belgrade: 1.6 million*; Novi Sad: 0.34 million*; Nis: 0.26 million*

€ 28.7** bn

€ 3,967**

7.120 mn*

*Source: Statistical Office of the Republic of Serbia / **Source: Ministry of Finance and Economy

Belgrade

Niš

Novi Sad

E75

E75

E75

E70

Corridor 10Corridor 7MotorwayRailroad

AirportRiver port

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aboutserbia

Welcome to Serbia

Serbia is often referred to as a gateway of Europe due to its geographical position on the map, serving as a borderline between the East and West. Two important European corridors, 7 - the River Danube and 10 – the international highway and railroad, intersect on Serbian territory, providing an excellent connection for both Western Europe and the Middle East. This in mind, Serbia is an ideal location for any company wishing to position its operations so that they may more efficiently serve its EU, SEE or Middle Eastern customers. Bordering the EU, Serbia still offers a possibility of enjoying all the benefits of working outside the EU, while also being able to provide services and transport goods in a projected and flexible time frame.

The highway system, also known as the “backbone” of Serbia, offers excellent connections between the north and south of the country. It consists of two main highways: E70: Croatia – Sremska Mitrovica – Belgrade and E75: Hungary – Novi Sad – Belgrade – Niš – Leskovac. More than 330 km of highway were constructed starting in 2009 and in 2010 the construction of a new 258 km “South Adriatic” highway was initiated, which will provide a better connection for south-western parts of the country as well as a link to the Montenegrin sea port, Bar.

In addition, Serbia boasts 3,800 km of railways and 587 km of navigable river routs, mostly on the Danube and Sava rivers.

Welcoming the Serbian Prime Minister, Fiat CEO Sergio Marchionne has paid a tribute to Serbia’s significant program of modernization which has created “a dynamic environment which is attractive to foreign investors. It is a great privilege for Fiat to be able to participate in the country’s future growth”.

Fiat-Chrysler press release, 16th April 2012.

Serbia is an upper-middle economy located at the doorstep of the EU, rich in industrial tradition and eager to further step-up its capacities. In the past ten years, Serbia has been pulsating with investors, many of which decided to stay - Fiat, Bosch, Michelin, Continental or Johnson Controls are just some of the industry leaders who now call Serbia their home. They feel comfortable in their new environment, while their products run smoothly along the Serbian highways. Their factories are connected to a modernized electrical, gas and networking grid and their Serbian workers are operating with the highest quality and precision. The EU accession process is welcoming changes at all levels of society through the adoption process of both European laws and values. With the EU candidacy status awarded in 2012, investors and their projects can now enjoy the advantages of both certainty and predictability.

This report aims at presenting the current trends and developments in Serbia’s automotive sector, as well as the key players and prospects for further development.

AUTOMOTIVE INDUSTRY IN SERBIA AUTOMOTIVE INDUSTRY IN SERBIA

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Where Zastava cars once rolled-out, currently stands a modern Fiat factory whose new 500L model is now rolling-out the very same lines and Fiat-Chrysler plans to further revive those days of glory when more than 200,000 units were produced in Kragujevac annually. One of the tasks of the 500L will be to conquer the U.S. market once again, as it will not be the first time a Kragujevac-made car graced the streets of America.

theindustrytoday

Nevertheless, the Government would like to do more by evoking another OEM to establish a car plant in Serbia. One thing is for sure - Fiat-Chrysler’s production enticed suppliers like Magneti Marelli and Johnson Controls to set-up shop nearby and join the local manufacturing portfolio. Fiat’s plant has an objective of nearly 80% of the local supply, as body, seats and bumpers are produced right next door. The start of the mass production of Fiat 500L in 2012 generated an unprecedented 42% annual growth in the industries’ turnover. It also recognized motor vehicles as Serbia’s no. 4 export item which amounted to some €470 million exported in 2012. As it is expected that Fiat and many other new factories in Serbia will be running at full capacity in the following years, the growth of this industry’s turnover and exports is bound to rise even further. As for passenger cars, the aim is to bump them from the no. 4 position to no. 1 on the list of exports.

Source: SIEPA, based data provided by the Serbian Business Registers Agency 2013.

www.fiatspa.com

The Fiat Kragujevac plant has an annual production capacity of 300,000 cars.

Turnover in Serbian Automotive Industry

2012 1,3202011 9292010 8372009 6452008 7322007 6202006 439

(€ m

illio

n)

Passinger cars..................................27.34%Tires................................................21.26%Wiring harness..................................14.28%Casted & machined parts...............8.85%Car batteries.......................................7.48%Plastic parts........................................2.67%Body parts...........................................1.54%Seat covers.........................................1.52%Oils & lubricants...................................1.30%Presed parts........................................1.30%Rubber hoses.....................................1.26%Trucks.............................................1.08%Engine components...........................0.94%Ball bearings.......................................0.89%Forged & machined parts...................0.85%Other.............................................7.44%

Key Products in Serbian Automotive Industry

2012

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At the time, cars in Serbia were being built in partnership with Fiat over a span of more than 30 years. Zastava 101 went on to be exported to the U.K., Poland and Egypt in circa 1.5 million units before production eventually ceased in 2008.

In parallel to Zastava’s growth during the 70’s and 80’s, the supplier industry in Serbia thrived as well. Companies soon discovered that the local market was by no means the limit of their success and as a result, improved their quality to a level where they were the regular tier 1’s of Ford, PSA, Opel or any other western European brands.

At the heart of that Golden Age, Zastava launched the Yugo, a new supermini car. The illustrious career of the Yugo became even more striking as no less than 150,000 units were sold in the U.S. alone. True, American consumers complained about many of the car’s features, but one must not forget the retail price at the time, which was just under $4,000.

Today, the automotive industry in Serbia is a combination of new factories established by foreign investors and traditional domestically-owned companies which withstood the test of time and whose brands remain ready for the New Age in car industry.

therootsSomething very true, although not very well known except by avid car fans, is that Zastava 101 was the world’s first modern hatchback. With a fifth door and front wheel traverse engine and gearbox, the 101 was extremely practical and appeared on the European roads three years before the famous Volkswagen Golf.

AUTOMOTIVE INDUSTRY IN SERBIA

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Another timeless brand comes from Serbia’s far northwest corner. Black Horse car batteries from FAS (Fabrika Akumulatora Sombor) have always enjoyed the reputation of being reliable in tough conditions. Neither heat nor cold have effect on the performance of these batteries thanks to 50 years of experience among FAS engineers. Black Horse batteries are especially popular in the Russian Federation. So much so, that it inspired the company to build a five-million-batteries-a-year factory in the Russian Federation. This long-standing tradition and success, has crowned FAS with the title as one of the first Serbian international investors.

Routing, taping, crimping – the wiring harness is considered one of the most cumbersome of the automotive parts. The “big three” in Serbia in this sub-sector are Yura Corporation from Korea and Germany’s Dräxlmaier and Leoni. When one is driving a BMW, Hyundai or Fiat there is a very good chance that wiring in the car came from Serbia. Typically built using Serbian copper, the wiring harness quickly became a dominating export product born out of the Serbian automotive industry. When Yura Corporation decided to erect four factories in Serbia, this sector quickly established its presence on Serbia’s foreign investment map.

In just two years, Korean Yura Corporation constructed four factories in Serbia.

Black Horse batteries are renowned for their performance in tough conditions.

After establishing a BMW unit plant in Serbia, Draexlmaier was also awarded a supply contract by the local Fiat plant.

www.yura.co.kr

www.fas.co.rs

www.draexlmaier.com


With assistance from the Serbian Government,Leoni transformed an unused and asbestos-contaminated factory into a modern facility employing 1,800 workers.

www.leoni.com

In analyzing the sector carefully, we realized that car tires are another no less important product in the Serbian automotive industry. This is primarily due to Serbia’s “giant” - Tigar Tyres from Pirot, which also happens to be a Michelin brand. Moreover, the global crises did not seem to affect this company at all, as it was consistently increasing its annual

production volume, reaching a massive 8 million tires produced in one year. This impressive result managed to attract another big player in the tire business – Cooper Tires from U.S., which also set-up production in Serbia. Together with Tigar’s new investments prospects, the overall tire production in Serbia is bound to break even greater records.

French-owned Serbian brand Tigar Tyres produces 8 million tires per year.

The Cooper Tires Serbian factory serves as a production base for the entire European market.

www.michelin.com

keycomponentsuppliers

www.coopertire.com

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Contitech Fluid located in Serbia’s northern tip will be an ideal location to serve the EU market.

www.contitech.de

FKL prides itself on more than 50 years of expertise embodied in their ball bearings and cardan shafts.

www.fkl-serbia.com

R

largest companies in serbian automotive industry 2012

•Contitech Fluid Serbia•Norma Group

•FAS-FabrikaAkumulatoraSombor

•Fiat Automobili Srbija•Magneti Marelli•Sigit•Zastava Tapacirnica•Johnson Controls Automotive•TPV Sumadija•PMC Automotive•Gomma Line•Promotor Irva•Zastava Kovacnica

•FKL-fabrika Kotrljajucih Lezajeva

•IGBAutomotive Comp

•Robert Bosch•Agena Tehnology

•Yura Corporation

•Yura Corporation

•Leoni Wiring Systems

•Yura Corp.

•D Company

•Tigar Tyres•Tigar Tehnical

Goods

•Autoventil

•PPT-Prva Petoletka

•Cooper Tire & Ruber Company

•FAD-FabrikaAutomobilskih Delova

•FAP-FabrikaAutomobila Priboj

•Poliester

•Knott Autoflex Yug

•DAD Dräxlmaier Automotive•Mecaplast Serbia

•Neobus•MARS

•FRAD Filteri•Grammer System

•Ikarbus•IPM-Industrija

Precizne Mehanike

•FAM Secanj Al

•Streit Nova

•GRAH Automotive

•Le Belier Livnica•Livnica Kikinda Al

Gomma Line–2012 SIEPA exporter of the year, is a young, yet fast-growing OEM supplier of rubber products and brake hoses, establishing their remarkable position in the automotive market in just five short years.

www.gomma.com

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There is one name which serves as a synonym in the global automotive industry and that name is Robert Bosch. The presence of this automotive legend is the clear sign that a country’s industry has reached a certain level – a level where Bosch takes attention and steps in. One special aspect of Bosch in Serbia is its’ Automotive Aftermarket Competence Center. What started out as a small operation in 2009, the center grew

into a cluster of more than 40 engineers responsible on daily basis for the data which defines, among other things, the launch of Bosch’s fuel management system products for the EMEA market. It was the Competence Center’s success which motivated Bosch to build its first factory in Serbia. The plant which is part of Bosch’s electric drives division is scheduled to commence with production in summer 2013.

All indicators show that the portfolio of automotive products from Serbia continues to grow - whether as a result of foreign brands such as Continental, Mecaplast and Grah Automotive or domestic companies such as ball bearings experts FKL, suspension specialists FAD or Gomma Line, who also happened to be SIEPA’s exporter of the year in 2012. Serbia aims at making automotive products a cornerstone of its industrial output. The way things are developing, it appears that failure is not an option.

In addition to the new electrical drives factory in Serbia, Bosch’s Automotive Aftermarket Competence Center is also responsible for entire the EMEA market.

www.bosch.com

FAD, a suspension system parts expert, is present in over 40 countries on all continents and is continuously striving to conquer new markets.

www.fad.rs


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In the meantime, all the strong efforts started to pay off with Greenfield projects independent of Fiat’s supply chain. This is mostly a result of many municipalities in Serbia grasping the concept and benefits of industrial zones and concentrated their energies in preparing “ready to invest zones”. As a result, factories of companies such as Bosch, Continental, Magna, Yura,

Leoni and many others were constructed at the right time. An efficient highway system which connects a very large portion of the country meant that these factories were not concentrated in one place but rather dispersed throughout the country. This created a balanced and positive development as labor was required all over the country.

With more than 25% of all inquiries directed at SIEPA arrive from the automotive sector it seems certain that this will remain one of the most developing industries in Serbia in times to come.

Name Country Value € M

Fiat Group Italy 940

Michelin France 138

Cimos Slovenia 120

Robert Bosch Germany 71

Cooper Tires United States 50

Yura Corporation South Korea 41

Proma - MA Italy 27

MagnetiMarelli Italy 24.5

Cooper Standard Automotive United States 20

Le Belier France 15

Leoni Germany 15

Johnson Controls United States 15

Sigit Italy 14

Dräxlmaier Germany 14

Grah Automotive Slovenia 13

Dytech Italy 13

Norma Group Germany 11

Continental Germany 11Source: SIEPA

Inquiries of Foreign Investors for Serbia

Automotive industry 25.5%Textile & Clothing 11.5%Metallurgy & Metal working 8.3%Electrical & Electronics 7.9%Constructions 5.7%Machinery & Equipment 5.4%Wood & Furniture 4.3%Food & Beverage, Agriculture 4.3%Plastic & Rubber 3.6%Leather 3.6%Energetics 3.6%Other 16.2%

Not many automotive suppliers can boast about having a plant in downtown Monte Carlo! Mecaplast has one in Serbia as well.

www.mecaplast.com

Largest Foreign Investors in Serbian Automotive Industry

Source: SIEPA

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Serbia has received more than $22bn of FDI since 2000, with the automotive industry accounting for more than 10% of the FDI stock. As mentioned, the industry has a decade’s long tradition of intensive manufacturing cooperation with international automotive companies, although it was companies such as France’s Michelin and the Slovenian CIMOS which broke the ice after the onset of country’s reforms. Nowadays, they represent the pillars of export in Serbia. Still, the great turn-around in the industry’s development occurred when the

largest investment of all time in Serbia was made by Fiat Group. Fiat was looking for a new plant in Eastern Europe and the result was a 66-34% joint venture between two factions which created Fiat Automobiles Serbia. In figures, this meant more than one billion euro of investment which went on to refurbish 350,000 m2 of production space and create a “world-class manufacturing” car plant. With Fiat came the key suppliers bringing names such as Johnson Controls, Mecaplast and Magneti Marelli to the Serbian portfolio.

FDItrackrecord

Johnson Controls and Magneti Marelli have a joint-venture in Serbia which supplies Fiat with both interior and exterior plastic parts, an additional Johnson Controls’ plant produces seats while Magneti Marelli deals with exhaust system production.

www.johnsoncontrols.com

www.magnetimarelli.com


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To offset initial capital investments and ease the start-up of business endeavors, the Government of Serbia offers financial incentive to Greenfield and Brownfield projects in the automotive industry. The subsidies are offered in two categories: standard-scale and large-scale projects.

For standard-scale projects, non-refundable state funds are offered through SIEPA in the range of €4,000 and €10,000 per new job created.

For large-scale projects, special packages are available provided that the investment value is at least €50 million and the project will employ at least 300 people. These projects are eligible to receive grants up to 20% of the total value of the investment.

For projects of an investment value higher than €100 million, subsidies are offered in the range of up to 17% of the total investment value.

The system of state grants was used by most foreign investors in the Serbian automotive sector, which includes: Fiat, Michelin, Bosch, Continental, Johnson Controls and many others.

Serbia still features one of Europe’s lowest tax rates and offers a wide possibility of tax reliefs and breaks, especially for export-oriented investments. For example, companies are exempt from corporate profit tax for a period of 10 years if they invest in fixed assets in an amount exceeding €9 million and employ a minimum 200 additional full-time employees during the investment period.

They are also relieved of both personal income tax and social security contributions for two to three years, provided that the investor is hiring first-time workers or those currently registered as unemployed. Moreover, VAT is not charged on import of raw materials and semi-finished goods for export-oriented production. Double taxation treaties with 48 countries also stipulate reduced withholding tax rates.

financialsupportscheme taxincentives

Investment value Available grants

Standard-scale projects €0.5 to €50 million €4,000 to €10,000 per job created

Large-scale projects €50 to €100 million up to 20% of investment value

Large-scale projects €100 million and above up to 17% of investment value

Financial Incentives

Rate Available reliefCorporate Profit Tax 15% 10 years

Salary Tax 12% 2 or 3 years

VAT 20% Exempt for export oriented production

Tax Incentives


Serbia is the only country in Europe which has a Free Trade Agreement with both the European Union and the Russian Federation. This unique advantage, together with numerous other customs-free export opportunities has proved to be one of the key motives of incoming investment in the country so far. Also, import into and export from free zones is free of VAT, customs and clearance, while income generated from production within the zone is also exempt from taxation.

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tradeunlimited

Market Trade Regime N0. of Inhabitants

European Union Free Trade Agreement 502,476,606

USA Generalized System of Preferences 313,499,452

Russia, Belorussia & Kazakhstan Free Trade Agreement 169,133,913

CEFTA Free Trade Agreement 26,839,686

EFTA Free Trade Agreement 12,660,623

Turkey Free Trade Agreement 74,724,269

Total 1,099,334,549

countries with signed free trade agreements with serbia

Non EU Countries

Russia, Belorussia & Kazakhstan

CEFTA

EFTA Turkey

EU Countries

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laborforceSerbia offers a competent and competitively-priced labor force. As the unemployment rate of 25% in 2012 indicated, it is certain that large-scale labor-intensive projects can easily be satisfied. This statistic, in conjunction with Serbia’s geographic and logistical proximity to the European market as well as its competitiveness with regards to overhead costs for virtually any type of production, indicates that the country offers rare and unique possibilities. Moreover, the technical education of the workforce is particularly strong as it stems from an educational system comprised of 11 technical

faculties located throughout the country. Serbian workers reveal high productivity levels, emphasize on the importance of quality, loyalty towards their employer and effortlessly manage to accommodate themselves to the English-speaking environment.

Salaries in Serbia are typically expressed and negotiated in net amounts, with taxes and contributions amounting to around 65% of the net salary. There is a Government plan aimed at further cutting these taxes which will shrink this percentage and make it more appealing to investors.

Average Net Salary in Serbian Automotive Industry (€)

150

200

250

300

350

2006 2007 2008 2009 2010 2011 2012

Source: Statistical Office Republic of Serbia

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Serbia Investment and Export Promotion Agency (SIEPA) was established more than a decade ago and entrusted with the mission to support Serbian companies doing business abroad and foreign companies seeking to set-up or expand their presence in Serbia. Today, a staff of nearly 50 multilingual employees handles projects from all over the world. We are able to provide you with up-to-date information on business opportunities in the Serbian automotive industry and serve as a liaison between you and those companies which best suit your needs.

We are proud to say that the portfolio of companies which relied on SIEPA advisory when selecting their

destination and project implementation in Serbia today consists of recognizable names such as Robert Bosch, Continental, Yura Corporation, Leoni, Magna and many more automotive companies of all sizes.

Our database of Serbian suppliers (www.serbia-suppliers.rs) will provide you with an overview of available business partners from Serbia, while our database of locations (www.serbia-locations.rs) will help you find the right Greenfield and Brownfield opportunities.

We invite you to contact our expert staff which is ready to assist you in developing your business in Serbia. Working with us is simple, easy and costs nothing.

SIEPA-yourpartner www.siepa.gov.rs

Mr. Vladimir TomicAssistant Director for FDI

T: +381 11 3398 809

[email protected]

Mr. Mateja Milenkovic InumaruExport Promotion Advisor, Automotive Industry

T: +381 11 3398 644

[email protected]

may2013

Serbia Investment and Export Promotion Agency3, Vlajkoviceva St. 5th floor, 11000 Belgrade, Serbia

phone: +381 11 3398 550; fax: +381 11 3398 814e-mail: [email protected]

www.siepa.gov.rs; www.doingbusinessinserbia.com

serbia•fap-fabrika automobila priboj •poliester •knott autoflex yug •dad dräxlmaier...

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