Albania trails neighbours in auto-parts production but economists see a chance to catch up

Albania trails neighbours in auto-parts production but economists see a chance to catch up
By bne IntelliNews June 17, 2022

Albania has a chance to take advantage of changes to the automotive industry’s supply model following the coronavirus (COVID-19) pandemic to help its auto-parts industry grow and integrate with the European automotive value chain, a World Bank Group report said. 

Currently, Albania’s auto-parts industry is part of the European regional value chain, along with other countries in Central and Southeast Europe and the Middle East and North Africa. However, the Albania Country Private Sector Diagnostic Report (CPSD) from the IFC and the World Bank describes Albania’s auto-parts sector as “nascent” and says that other Western Balkan countries, including Bosnia & Herzegovina, Montenegro, North Macedonia and Serbia, have “established a substantial presence in the auto industry, and their automotive sectors are significantly larger than Albania’s”. 

“Albania’s automotive sector is smaller than those of its regional peers, and auto parts account for less than 1% of its total merchandise exports,” it adds. 

Foreign direct investors started setting up auto-parts factories in Albania over the last 10 years, drawn in by “relatively cost-competitive labour costs, improvements in economic stabilisation and the investment climate, and fiscal incentives”, said the report. 

There are currently six foreign companies present, specialising in niche components such as exhaust systems, rubber parts and wiring. They include PSZ Albania GmbH, part of German Group PSZ Electronic GmbH, French automotive supplier Delmon Group and Sumitomo Electric Group’s SEWS CABIND. 

Since the pandemic disrupted global supply chains, with a highly negative effect on the automotive industry, some companies have been looking for suppliers closer to their home markets. 

“Albania may take advantage of the changes in the vehicle production, processes and reshoring of value chain related to COVID-19,” the report says. 

“An important realignment is underway not only for automotive products, but also for production processes and players throughout the value chain. … In the aftermath of the pandemic, heightened concerns about the vulnerability of global supply chains may prompt manufacturers to move a larger share of auto production back into the European region, which could also benefit Albania.”

There are also changes with the increasing electrification of conventional and hybrid vehicles, and the growth of the electric vehicle (EV) subsector. Again, says the report, this may create opportunities for Albania to increase its participation in the European value chain.

The report says that developing the sector “could catalyse job creation by fostering the development of a dynamic, globally competitive manufacturing sector”. 

“In this turbulent time, fostering a robust and sustainable recovery will require a more productive and resilient private sector,” said Emanuel Salinas, World Bank country manager for Albania.