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| A man working in the smelting of minerals to produce copper (archive) |
The impacts of COVID-19 and the subsequent supply chain disruptions have prompted several companies to consider reevaluating their production supply chains.
This is an opportunity that Albania can capitalize on by exploring the reshoring trends in the automotive value chains and more structural changes in automotive production processes, according to a blog by four economists from the World Bank.
According to economists, the European automotive industry can be divided into two areas: (1) major regions with large markets where strategic, managerial, and marketing decisions are made, and complex activities based on highly skilled labor are carried out, and (2) peripheral regions characterized by small markets, where auto parts and simple components are produced for export, Monitor reports.
Indeed, the regional value chain of automobiles in European periphery links major international automakers and large tier-1 suppliers, especially in Western Europe, with parts suppliers in Central and Southeastern Europe, the Middle East, and North Africa. As a result, a dense automotive trading network offers proximity to major markets, low labor costs, extensive industrial experience, and more.
Furthermore, the regional value chain of European automobiles plays a crucial role in the industrial development across the entire Western Balkans, with Serbia, North Macedonia, Montenegro, and Bosnia and Herzegovina already having a considerable presence. The pursuit of cost efficiency benefits drove investments away from the core European auto market before the pandemic, but COVID-19 pushed firms to refocus on suppliers that are closer. This could work in favor of Albania, economists point out.
According to them, the long-term trend of automotive electrification offers Albania room to enhance its strategic position in the regional European automotive value chain periphery. With the growth of the electric vehicle subsector, including the growth of electrification in conventional and hybrid vehicles, Albania as a major copper producer could emerge as a hub for copper wire and sub-assemblies for electric motors and energy electronics.
According to the Private Sector Diagnostic in Albania (CPSD) - an assessment of private sector investment opportunities produced by the World Bank and the International Finance Corporation, the automotive parts industry in the country is still in its early stages, with low labor costs attracting more attention. Production in Albania mainly involves labor-intensive products that require semi-skilled workers who can produce exhaust systems, rubber parts, and electrical installations. The growth of this industry will require a focus on workforce skills, support supply chains, and encouraging structures.
Albania needs a more technically and productively skilled workforce equipped with diverse managerial capabilities to remain competitive and enter more sophisticated segments of the automotive value chain. Therefore, the expansion of technical education infrastructure in Albania is crucial, economists suggest. However, the long-term competitiveness of the sector will depend on Albania's overall competitiveness in terms of cost and ease of doing business.
For instance, Delmon Group, a French supplier of automotive parts for the automotive, aerospace, and rail industries with factories in France, China, and Spain, imports all primary material because even if it found high-quality material suppliers in the country, the managerial sophistication to efficiently handle bulk orders is typically lacking.
Albania also has the opportunity to partner with or learn from neighboring countries: