If you are a company conducting business in the automotive industry with intentions of expanding on the European market, where do you look? The answer may be the Central European country of Slovenia.
Slovenia has, over its relatively short existence, established itself as a country where several companies produce and manufacture high-quality products for the automotive industry. According to the “Invest in Slovenia” website, Slovenia has highly qualified people working in the auto industry, with over 14,000 direct positions in some 270 automotive companies. Slovenia has nearly 12,000 students in secondary schools for automotive and mechanical engineering, some 3,300 students enrolled in undergraduate courses in mechanical engineering, and more than 2,000 registered researchers. Slovenian companies have achieved compliance with EU green and safety requirements and international supply industry leaders. German carmakers Audi, BMW, Daimler, and VW, as well as MAN and Ford in Germany, account for some 40% of car component exports from Slovenia, followed by France, Italy, Austria, the UK, and the USA. Slovenian companies are suppliers to the assembly lines of Renault, PSA, Brosse, Lombardini, Landini, Fiat, and Magna Steyr. Slovenia has innovation centers, institutes for materials and technologies, and knowledge academies which help Slovenian companies to evaluate the technical feasibility of new ideas and technologies. It is also worth noting that Hidria (a company involved in the supply and development of a variety of subsystems and components) constructed its third R&D facility in Slovenia, co-financed by the European Regional Development Fund.
While investment in Slovenia may in some aspects be more expensive than in other Eastern European countries, some investors have already decided to acquire medium-sized and smaller Slovenian manufacturers. For instance, in 2016 Kety Group S.A., one of the leading European suppliers of high-quality advanced aluminum products, acquired AHA Emmi Ltd (now Aluminum Kety Emmi Ltd). Emmi is a modern Slovenian aluminum company that is involved with the automotive industry, manufacturing and supplying car body parts, which utilize aluminum’s light weight to achieve reduced fuel consumption. Another example is the 2015 acquisition by the US-based Weiler Abrasives Group of Swatycomet Ltd (now Weiler Abrasives Ltd), a Slovenian company developing high quality artificial abrasives and technical fabrics regularly used in the automotive industry for brushing car chassis castings. This was a strategic acquisition, with the Weiler Group looking to expand to European markets, as part of their plan to become a global leader on the abrasives market. There are also other acquisitions that have taken place (e.g., the acquisition of the company Cimos by the Italian company Palladia Finanziarie), as well as potential acquisitions which we can assume are taking place based on publicly available information (e.g., TAB, which produces batteries and accumulators).
At the same time, Slovenian legislation promotes and encourages foreign investments through the Investment Promotion Act that was adopted and enacted in 2018, offering investors investment incentives in the form of subsidies, loans, and guarantees, and, by way of ensuring the purchase of real estate by a self-governing local community, at a price below market value. This, in turn, aids Slovenia’s attempts to become an attractive destination for so-called “greenfield” investors. For these kinds of investments, Slovenia could become even more popular, as it offers a pool of highly knowledgeable individuals able to provide specific know-how and skills, coupled with an environment that actively supports foreign investors. According to data from the Slovenian SPIRIT Public Agency and UNTCAD, such foreign companies grow faster than their average Slovenian counterparts.
Given all this, it is worth noting the investment of Magna Steyr AG, which raised some legal questions (the assessment of which extends beyond the scope of this article), but which is nonetheless an example of a “greenfield” investment in Slovenia. Magna Steyr – part of the Magna Group, a leading global and EU automotive supplier – decided to build a car body paint shop in Slovenia’s Hoce-Slivnica municipality. According to the report of the that municipality, Magna received a total of EUR 18.61 million of state subsidies as an investment incentive under the previously-mentioned Investment Promotion Act.
In conclusion, Slovenia can be one of the preferred destinations for investors in the automotive manufacturing market, whether they choose to acquire one of the country’s medium-sized or smaller companies or make a “greenfield” investment. While it is true, for the time being, that Slovenia’s full potential in attracting foreign investors is not yet realized, some are already reaping the benefits of investing in Slovenia, with newcomers expected in the future.
By Igor Angelovski, Partner/Independent Attorney at Law in cooperation with Karanovic & Partners
This Article was originally published in Issue 6.2 of the CEE Legal Matters Magazine. If you would like to receive a hard copy of the magazine, you can subscribe here.