The Balkans region of Southern Europe has been the scene of devastating and quite horrific civil strife over the last ten years. It is without doubt an immense human tragedy. But the resilience of the people of the region provides hope. In the face of economies ravaged by the effects of war, the process of reconstruction is well underway in many of the recently formed countries of the former Yugoslavia. The region has a long tradition of auto industry activity and the auto industry looks certain to play a key role. In Bosnia and Herzegovina, Volkswagen has now revived vehicle production and is working with a local partner. From Sarajevo, Eldar Dizdarevic reports…
Having withdrawn from Bosnia and Herzegovina in 1992, Volkswagen invested some DEM 48 million in the Sarajevo factory to revive car production in 1998. The newly founded company is ‘Volkswagen Sarajevo’ — of which the German company owns 58%. The remaining 42% belongs to a local partner, UNIS Holding of Sarajevo.
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At present, there is assembly of Skoda Felicia and Skoda Octavia taking place in the Sarajevo factory. It is expected to produce between 5,000 and 7,000 cars by the end of this year (around 2,000 units were assembled in 1998 and 4,000 units in 1999).
Volkswagen has also started assembling its most popular pick-up trucks and small bus models – VW T4 (Transporter) in Sarajevo. The first truck was assembled on 26th June and will be followed by 130 units by the end of this year.
‘We plan to assemble around 130 units of VW T4 (Transporter) trucks this year. But, if we can make an export agreement with Croatia and Turkey, then assembly activity will increase’, said Faruk Smajilbegovic, the head manager of UNIS Holding. At the moment, assembly is Semi-Knocked Down (SKD – the lowest level of disassembling). The components will be brought in from Volkswagen in Germany.
Since the Bosnian market is small, the decision has been taken to target export markets. Around 60 percent of production is for the domestic market and 40 percent for export (mostly Turkey). ‘It is expected that assembly of the new Skoda Fabia in Sarajevo will also begin very soon, probably at the end of July”, said Smajilbegovic.
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By GlobalDataOther export opportunities are being actively sought for Sarajevo-produced cars. The car industry in B&H, with its long tradition over several decades, looks in particular to Eastern Europe and the Middle East markets for additional volume. According to UNIS, plans are in place to increase the number of assembled cars to 35,000 units in 2003. This level of output is what might be termed ‘normal’ – prior to 1991 and before the war in Bosnia-Herzegovina, annual production was of the order of 45,000 cars. For now, Volkswagen Sarajevo still has a huge challenge ahead to penetrate foreign markets.
It is hoped also that the level of local content and manufacture of parts will gradually increase and that some parts can be exported to other VW plants. It is expected that the production of components will commence soon, as was the case until 1991. ‘We will start with the production of exhaust system parts for VW’s diesel engines’, said Smajilbegovic. The first delivery from Sarajevo to VW’s factory in Saltzgite (Germany) will be in July, and delivery to VW’s factory in Mexico will take place within the next two months.
In global auto industry terms the activity in Sarajevo may be small, but the trend is towards increasing volume and activity. Volkswagen recognises that Sarajevo offers a good opportunity and at low-cost to both meet local auto demand and also act as a springboard to other markets in Eastern Europe and the Middle East.
Fig 1:-
VW T4 minibus being assembled in the Sarajevo plant
Fig 2:-
Skoda Felicias ready to roll from the Sarajevo factory
Eldar Dizdarevic
Sarajevo
fax: ++387 33 468 090
e mail: eldard54@yahoo.com
