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Current status of the automotive sector . 4 th meeting of the SEE Investment committee. Mr. Bojan Jankovic Deputy director. April, 2009. Presentation outline. Putting the region and Serbia in the context Automotive Industry Profile of Serbia Serbia automotive suppliers survey

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Presentation Transcript
slide1

Current status of the automotive sector

4th meeting of the SEE Investment committee

Mr. BojanJankovic

Deputy director

April, 2009

presentation outline
Presentation outline

Putting the region and Serbia in the context

Automotive Industry Profile of Serbia

Serbia automotive suppliers survey

Current status and issues in the sector

What should IPA’s do and what they could use

what is the potential of the region
What is the potential of the region?
  • Hopefully a significant OEM in the next ST period
  • Potential for another OEM location
  • Reducing operating expenses
  • Access to work force with less limitation then in EU
  • Market accessibility, some opps available
  • JV potential
  • Incentives on a broader level then in EU
    • Free Zones
    • Tax incentives
    • Financial incentives
    • Flexibility in labor regulations
reducing operating expenses
Reducing operating expenses

Which region is most attractive for manufacturing activities?

38%

Vs. 32% in 2007

12%

12%

5%

3%

2%

1%

Southeast

Central

Western

Russia,

Northern

Nordic

Baltic

Africa

countries

Europe

Europe

Europe

countries

Ukraine,

Belarus

Source: Ernst & Young Southeast Europe Attractiveness Survey 2008 - 216 international executives

slide6

SEE - Clear leadership on costs and productivity

Which region in Europe is most attractive in terms of labor and productivity?

Flexibility of labor legislation

Productivity increase

Labor cost

33%

36%

49%

1

1

1

18%

14%

15%

10%

13%

16%

2

2

2

3

3

3

Western Europe

Southeast Europe

Central Europe

Central Europe

Southeast Europe

Russia

Ukraine

Belarus

Western Europe

Southeast Europe

Central Europe

Source: Ernst & Young Southeast Europe Attractiveness Survey 2008 - 216 international executives

trade diplomacy market access
Trade diplomacy – market access
  • EU market
  • FTA with Russian Federation - Current negotiations to include passenger vehicles in the FTA (commercial vehicles already included)
  • Ukraine and Byelorussia trade agreement in process
  • CEFTA – duty free access to 20 million people market
fiat serbia
FIAT Serbia
  • The plan is for FIAT to invest EUR 700mn for production of 300,000 units/year
  • Additional EUR 500mn expected through supplier network development
  • Global crisis will affect the project in terms of the time schedule and production level
  • The production level for 2009 15,000 vehicles
automotive suppliers in serbia
Automotive suppliers in Serbia
  • SIEPA new automotive suppliers survey results (2008)
  • Approximately 70 automotive parts and systems companies identified that are capable of supplying automotive OEMs, as tier 1 or 2 or spare parts market
  • A complete survey results together with detailed profile of suppliers will be available in SIEPA in the first half of 2009
what is being produced
What is being produced?

Engine components mostly not assemblies -flywheels, valves, camshafts (significant inflow of FDI)

Plastic and rubber parts – various exterior and interior parts (mostly produced by domestic companies)

Electrical and electronic – mostly wire harness but also batteries and starter motors (significant inflow of FDI)

Source: SIEPA survey June 2008

company ownership
Company ownership

Source: SIEPA survey June 2008

turnover and exports
Turnover and exports
  • Foreign investors as key factors of growth

Source: SIEPA survey June 2008

sector employment
Sector employment

Number of employees declining in domestic companies (due to privatization) but we see a sharp increase in foreign owned companies (new investors coming, growing of existing operations, etc…)

Source: SIEPA survey June 2008

current status of the industry in serbia
Current status of the industry in Serbia
  • Limited availability of local companies with international potential
  • Domestic companies struggling to improve their production, quality potential and links with Tier 1 and Tier 2 producers
  • Diversification to small series of local companies as a barrier for exports
  • Significant number of companies from the component sector still not privatized
  • Companies facing liquidity issues
  • Growth is coming from foreign investors! How can we stimulate local companies?
current status of the industry in serbia1
Current status of the industry in Serbia
  • Local OEM’s operating at limited capacity, primarily due to lack of demand on both markets but also because of their low ability to add value – that has strong impact on suppliers
  • FIAT reaction to crisis also limiting the short term potential to motivate local companies to invest as well as to attract suppliers
  • Lack of research and development centers or activities a crucial weakness
  • Linkages between companies and educational institutions not appropriate

Bottom line : Serbia and the region depend heavily on FDI, primarily a strong OEM presence

but needing fdi in auto sector these days
But needing FDI in auto sector these days…
  • Strong decline in demand for the automotive products worldwide
  • Expansion is no longer the word of choice –we’re talking about cost efficiency, optimization, etc…
  • Financing potential on the market for companies in the sector is scarce - this issue needs to be addressed
  • Greenfield loosing their appeal
  • Protectionist measures from Governments might limit their motivation to move short term
so more action must be taken
So more action must be taken
  • Governments can create support schemes (access to low interest rate credits) to foreign investors as well (ex. SDF or FZR)
  • But funds are needed for this - what are the options?
  • JV importance ever increasing – Gov’s need to address the skill gap and other important issues in local companies – but without OEM it’s difficult…
  • Bureaucracy has to be reduced to a minimum level, improvement in investment policy a must
  • BUT the most important issue is knowledge – when Gov’s contract funding it affects investments in education!
  • IPA’s must provide more services! And there are costs associated with it…
databases must be developed
Databases must be developed

NEW on our website

Search by:

Sector / sub-sector

markets

technology used

products

certificates

having an expert staff within the agency is important
Having an expert staff within the Agency is important

Mr. Vladimir Tomic, Automotive industry advisor

      • Tel.: +381 11 3398 809, 3398 550
      • E-mail: vladimir.tomic@siepa.gov.rs
  • MSc Mechanical Engineering, Faculty of Mechanical Engineering, Belgrade, Serbia
  • Two years experience with “Citroen Serbia”
  • Three years experience as FDI advisor in SIEPA
what is the impact of it all on ipa s
What is the impact of it all on IPA’s?
  • Funding of investment promotion activities under question
  • Protectionism might endanger promotional efforts

That is why we need more direct support for the regional IPA’s

  • Local IPAs need resources:
  • Internal capacity:
  • Locations database
  • JV partners database
  • Suppliers database
  • Knowledge database
  • Promotional capacity:
  • Brochures
  • Conferences
  • Fairs
  • Road shows
thank you
THANK YOU!

Serbia Investment And Export Promotion Agency SIEPA

Vlajkoviceva 3/V

11000 Belgrade, Serbia

Phone: +381 11 3398 550

Fax: +381 11 3398 814

office@siepa.gov.rs

www.siepa.gov.rs