automotiveindustry

serbia

aboutserbiatheroots

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aboutserbia

Welcome to Serbia

Republic of Serbia

Serbia is often referred to as a gateway of Europe due to its geographical position being a borderline between the East and West. Two important European corridors, number VII - the River Danube and number X – the international highway and railroad, intersect on Serbian territory. Serbia is thus a perfect place for a company to locate its operations if it wants to closely and efficiently serve its EU, Russian, Turkish or Middle Eastern customers.

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 and E75. E70 links Croatian and Slovenian Adriatic ports with Belgrade and

then connects to E75. It starts from Hungary via Novi Sad to Belgrade and Nis where it branches to Macedonia and Greece port of Thessaloniki on one side and Bulgaria on another. More than 330 km of highway were constructed from 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. The map on the right is a visual representation of these information.

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

TIMEZONE

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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*

€ 34.3** bn

€ 4,464**

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

Fiat CEO Sergio Marchionne paid a tribute to Serbia’s significant program of modernization which 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 EU candidate country ideally located to serve EU, Russian and Turkish markets.

Many world-renowned companies have recognized Serbia’s potential and decided to locate operations in Serbia. For some of them, Serbia serves as a manufacturing hub that enables duty-free exports to a market of almost 1 billion people. Others are attracted by our country’s adept level of English language proficiency, highly skilled and easily trained workforce and generous tax and incentives environment. Regardless of the reason for their initial interest, businesses that decide to set up operations in Serbia encounter a reliable and dynamic country that provides them a much greater opportunity than they initially perceived. Serbian infrastructure is improving rapidly –some important development projects have been finished, many are in the implementation phase and many more in the pipeline.

Serbia is set firmly on its path to join the European family and the accession negotiations were formally launched in January 2014 during the first Intergovernmental Conference.

However, not yet being a full EU member provides numerous advantages to businesses. On one hand the legal and business structures are fully in line with EU regulations while on another Serbia still has a possibility to be more flexible in other aspects, from the fiscal policy to the incentives programs.

AUTOMOTIVE INDUSTRY IN SERBIA AUTOMOTIVE INDUSTRY IN SERBIA

54

Zastava cars was a local producer of vehicles and components which formed an industrial partnership with FIAT starting in 1953 and spanning over 30 years in time. Zastava 101 was a huge success for the company and was exported to UK, Poland and Egypt in over 1.5 million units before the cease of production in 2008. During its peak production and sales times in the 80’s Zastava launched another great success, a Serbian built super-mini car named Yugo. The illustrious career of the Yugo became even more striking as more than 150,000 units were sold to the US market. It featured in many of the Hollywood blockbusters and although criticized for its Spartan built it showcased the Serbian entrepreneurial and business spirit which knew no boundaries.

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 became the regular tier 1’s of Ford, PSA, Opel and other global brands.

Today, the automotive industry in Serbia is again fueled by the cooperation with the Torino car giant Fiat and Zastava. At the same time the tradition and know how in the industry attracted a significant number of foreign investors to the sector which in turn stimulated local suppliers to improve and grow.

In 2008 a new impetus was given to the automotive industry of Serbia by a JV between Fiat and Zastava. The new company named FAS (Fiat automobiles Serbia) is 67% owned by Fiat and the remaining 33% are owned by Serbia. Fiat was obliged to invest 940 million EUR into modernization of

the existing factory which urgently needed new technology and products. Until now, around 1.05 billion has been invested to Serbia. After more than 20 years the built in Serbia vehicles found their way to the European and US markets with a new Fiat 500L model.

theroots theindustrytoday

The start of mass production in 2012 generated an unprecedented 42% annual growth in industry turnover. Fiat Automobile Serbia produced 117,000 500L vehicles in 2013, majority of which were exported to US and EU markets creating over 1.5 billion in turnover and prompting FAS to the number 1 position as the largest exporter from Serbia.

Many international companies set up production facilities in order to supply FAS, such as Magneti Marelli, Johnson Controls, Draxlmaier, Mecaplast, Sigit, Lames and others. They invested around 150 million and employed around 2500 workers. Additionally, investors from the sector which already had production companies in Serbia expanded their investments to supply FAS. The ambitious plan envisages that 80% of components should be locally sourced and it provides stimulus for additional investments, both foreign and domestic.

Having in mind the success of the Fiat project and the availability of resources in the industry, the Government of Serbia works hard to motivate additional OEM’s to consider investments and is ready to provide exceptional support.

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.

Passinger cars.....................................54.00%Tires................................................11.32%Wiring harness......................................9.50%Casted & machined parts....................4.54%Car seats...............................................3.12%Body parts.............................................2.23%Rubber hoses........................................1.26%Car Batteries.........................................1.14%Seat Covers..........................................0.92%Oils & lubricants....................................0.67%Pressed parts........................................0.66%Wiper system........................................0.64%Trailers...............................................0.60%Forged & machined parts....................0.46%Ball bearings.........................................0.41%Other.............................................4.21%

Key Products in Serbian Automotive Industry

2013

An interesting and not very well known fact is that Zastava 101, a vehicle built in the Zastava plant in the early 70’s, was the first modern hatchback. With a fifth door and front wheel traverse engine and the gearbox, the 101 was extremely practical and future on European roads three year before the famous VW Golf hatchback.

Turnover in Serbian Automotive Industry

(€ m

illio

n) 2013 2,0892012 1,3942011 9292010 8372009 6452008 7322007 620

AUTOMOTIVE INDUSTRY IN SERBIA

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Besides vehicles produced by Fiat, Serbian automotive sector shows a diversified portfolio of component producers. Passenger and other tires are very important products rolling out of Serbia in large volumes. This is primarily a result of strong industrial heritage and brands created in the past 50 years such as Tigar Tyres from Pirot or Trayal from Krusevac. Both are now a part of large systems as they were acquired by Michelin and Cooper Tires respectively. Michelin is

currently undergoing a significant investment project which aims to increase the current production of tires by additional 1.5 million tires a year in addition to the existing capacity of around 8 million. Production of globally recognizable brands such as Michelin, Tigar, Riken, Kormoran and Rotex is a big step forward for the company and the region. Cooper Tires and Michelin plans for the future suggest large growth of the turnover in next 10 years.

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 South 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 one of the dominating export products born out of the Serbian automotive industry. These companies have six factories in Serbia and employ thousands of workers. Yura Corporation went beyond the assembly of wire harnesses and has set up a company named Yura Eltec to supply production facilities with wires and cables directly from Serbia.

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

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

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

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

www.michelin.com

www.yura.co.kr

www.draexlmaier.com

keycomponentsuppliers

www.coopertire.com

AUTOMOTIVE INDUSTRY IN SERBIA

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

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AUTOMOTIVE INDUSTRY IN SERBIA AUTOMOTIVE INDUSTRY IN SERBIA

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There is one name which is a synonym in the global automotive industry today - Robert Bosch. The German multinational is very careful and selective in the planning process and attracting them to set up a factory near Belgrade is a clear sign of opportunities Serbia provides to multinationals from the industry.

A very special aspect of Bosch presence in Serbia is its’ Automotive Aftermarket Competence Center. What started out as a small operation in 2009 grew into a team of more than 40 engineers responsible

for the data which defines, for example, the launch of Bosch’s fuel management system products for the entire 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.

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All indicators suggest that the portfolio of automotive products from Serbia continues to grow over the years – 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 was voted to be SIEPA’s exporter of the year in 2012. The decision of the Government to make automotive products a cornerstone of its industrial output proves to be a correct one.

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

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

•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

•Proleter

•PPT-Prva Petoletka •Cooper Tire & Ruber Company

•FAD-FabrikaAutomobilskih Delova

•FAP-FabrikaAutomobila Priboj

•Poliester

•Knott Autoflex Yug

•DAD Dräxlmaier Automotive•Mecaplast Serbia

•MARS

•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 theyear, is a young, yet fast-growing OEMsupplier of rubber products and brakehoses, establishing their remarkableposition in the automotive market in just six years.

www.gomma.com

AUTOMOTIVE INDUSTRY IN SERBIA AUTOMOTIVE INDUSTRY IN SERBIA

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Serbia has attracted more than $22bn of foreign investments since 2000, automotive industry accounting for more than 10% of the total 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.

More than 60 international investors have invested almost €1.7 billion, creating more than 27.000 jobs.

The Serbian automotive industry supplies almost all major European and some Asian car manufacturers. Nowadays, these investors represent the export champions of Serbia.

Still, the true impetus to the industry’s development occurred when the largest production investment ever in Serbia was made by Fiat Group. The new plant brought in technological and business practices which spilled over not only to additional Tier 1 foreign investors such as Johnson Controls or Magneti Marelli, but also to local producers.

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In the meantime, the promotional 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 concentrating their

energies in preparing “ready to invest zones”. 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 stemming from the automotive companies it seems certain that this will remain one of the most vibrant sectors in Serbia.

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

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

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

AUTOMOTIVE INDUSTRY IN SERBIA AUTOMOTIVE INDUSTRY IN SERBIA

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. Companies are exempt from Corporate Profit Tax for a period of 10 years starting from the first year in which they report taxable profit if they invest an amount exceeding approximately €9 million in fixed assets, and employ at least 100 additional employees throughout the investment period.

Companies may also be subject of personal income tax exemption and social security contributions exemption under the certain criteria.

Starting from July 1st, 2014 new employment entitles employers to a sizable relief of taxes and contributions paid on net salary, as of the moment of employment until June 30, 2016. for new employment said reduction may be as follows: 65% (for 1-9 new jobs created), 70% (for 10-99 new jobs created) up to 75% (for 100, and more new jobs created) 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.

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To offset initial capital investments and ease the startup of business endeavors, the Government of Serbia offers financial support for Greenfield and Brownfield projects in manufacturing, export-related services and strategic tourism projects. The program is governed by the Decree on financial incentives.

The level of funds which may be awarded are determined in accordance with the criteria set forth by the Decree in relation to the eligible investment costs (investment into material and non-material assets) or in relation to the eligible costs of the gross salaries from new jobs during a two-year period after the investment project’s implementation.

The amount of funds which can be awarded to large enterprises is determined up to 50% of the eligible costs for the implementation of the investment

project. The amount of funds may be increased by up to 20 percentage points for small-sized companies and up to 10 percentage points for medium-sized companies.

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.

financialsupportscheme taxincentives

Rate Available reliefCorporate Profit Tax 15% 10 years

Salary Tax 10% -

VAT 20% Exempt for export oriented production

Tax Incentives

AUTOMOTIVE INDUSTRY IN SERBIA

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

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AUTOMOTIVE INDUSTRY IN SERBIA

tradeunlimited

laborforceSerbia offers competent and competitively-priced labor force. Given the high unemployment rate standing around 20% we can easily satisfy both labor intensive and skill intensive jobs. 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 report high productivity levels, understand the importance of quality and show 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.

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

Average Net Salary in Serbian Automotive Industry (€)

150

200

250

300

350

2007 2008 2009 2010 2011 2012 2013Source: Statistical Office Republic of Serbia

countries with signed free trade agreements with serbia

Non EU Countries

Russia, Belorussia & Kazakhstan

CEFTA

EFTA Turkey

EU Countries

Mrs. Mirjana AleksicExport Promotion Advisor, Automotive Industry

T: +381 11 3398 243

mirjana.aleksic@siepa.gov.rs

Mr. Mateja Milenkovic InumaruExport Promotion Advisor, Automotive Industry

T: +381 11 3398 644

mateja.milenkovic@siepa.gov.rs

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automotive industry in serbia

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.serbiasuppliers.rs) will provide you with an overview of available business partners from Serbia, while our database of locations (www.serbia-locations.rs) will helps 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

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

phone: +381 11 3398 550; fax: +381 11 3398 814e-mail: office@siepa.gov.rs

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