Innovation and digital transformation drive Croatia’s auto industry
Croatia’s automotive sector took a knock from Covid-19 – but innovation and digital transformation are securing a future that is safer, smarter and more sustainable.
The Croatian automotive sector is largely composed of original equipment manufacturers (OEM) who produce quality parts for foreign markets, primarily within the European Union. A considerable 90% of its profits come from exports and the industry accounts for approximately 1.8% of all Croatian exports.
The automotive industry in Croatia benefits from a highly skilled workforce, excellent infrastructure, and proximity to the markets and automotive production facilities of western and central Europe.
The sector employs more than 10,300 people in 478 companies. These include AD Plastik, which produces parts for leading car manufactures such as Renault-Nissan-Mitsubishi Alliance and Stellantis (a recent merger between the FCA and PSA Group) and Lipik Glas, which supplies windscreens to high-end automakers such as Aston Martin, Alfa Romeo, Ferrari and McLaren.
Impact of Covid-19
The industry has been hit hard by Covid-19 – and although there was a 32.4% increase in sales in the first three quarters of 2021 compared to the same period last year, the market has not yet fully recovered and new registrations were down 21.9% compared to data for September 2019.
Petrol and diesel cars continue to lose ground, and almost completely account for the overall fall in sales, while electric vehicles (EVs) are on the rise.
"Croatian companies have demonstrated the ability to adjust to the new market environment and, in cooperation, have further adjusted their operations, supporting production of greener and safer vehicles. We are supporting change by providing financial support to the export industry and supporting capital expenditure to businesses looking to expand, facilitating these firms’ access to trade finance and much-needed long-term funding. - Vedrana Jelušić Kašić, board member, Privredna banka Zagreb
Vedrana Jelušić Kašić, board member, Privredna banka Zagreb
The pandemic has also accelerated digital transformation in Croatia. Information and communication technology (ICT) is a growing trend in the automotive industry, and vehicles are becoming safer, smarter, more sustainable and more connected to the user than ever before.
“The Croatian companies, especially those doing business with OEMs have demonstrated ability to adjust to the new market environment and in cooperation have further adjusted their operations supporting production of greener and safer vehicles. ” says Vedrana Jelušić Kašić, a board member of Privredna banka Zagreb. “We are supporting this change by providing financial support to the export industry and supporting capital expenditure to businesses looking expand; facilitating thus firms’ access to trade finance and much needed long-term funding.”
Fossil fuel vehicles
Petrol-and diesel-powered vehicles have recorded a downward trend in new registrations in recent years, according to reports from ACEA and the Croatian Bureau of Statistics.
Petrol vehicles accounted for 54% of new registrations in the first three quarters of 2021 – down from 57% in the same period in 2020, and from 60% in 2019. The diesel sector struggled even more, with its share of new registrations dropping from 36% in 2020 to 26% in 2021.
In 2020 the share of EVs was still less than 1% of total passenger cars. However, things are starting to change and new grants are helping to boost the industry. The government aims for EVs to make up more than a third of the country's vehicle fleet by 2050.
The Environmental Protection and Energy Efficiency Fund allocated €14m to co-finance the purchase of EVs in 2021, and during the first three quarters of 2021 the share of registrations for hybrid EVs rose to 13% (from 5% in 2020). Hybrid vehicles are the main source of EVs in Croatia, accounting for more than 80% of sales in the first three-quarters of both 2020 and 2021.
Privredna banka Zagreb’s client AD Plastik, a leading company for the development and production of car interior and exterior components in Croatia and one of the leading ones in Eastern Europe with production plants in five countries, is making continued investments to reduce the greenhouse gas emissions by choosing lighter materials and thus helping reduce the weight of the vehicles.
Hydrogen could be a viable energy source in the future, and the Croatian government has defined the country’s hydrogen strategy until 2050. The first hydrogen-production facility is expected to be built by 2025, which aims to fuel up to 18,000 fuel-cell EVs by 2030, according to Fuel Cells and Hydrogen Joint Undertaking.
Several major companies in Croatia are already active in the field of hydrogen. The Zagreb public transportation company is considering the acquisition of hydrogen-fuelled buses, while oil company INA is considering using its refinery in Rijeka to produce and supply hydrogen.
Croatia also produces its own EVs, with the most prominent manufacturer is Rimac Automobili, which designed the world’s fastest EV worth €2m, and has recently entered into a joint venture with Bugatti creating a new automotive and technological powerhouse Mate Rimac, the founder, has been one of the winners of Innovators Under 35 Europe by MIT Technology Review commended for his contribution towards greater sustainability of the automotive sector.
AD Plastik has embraced innovation in their operations and has for example used natural-based fillers in polypropylene injection moulded products contributing to the mass reduction and increase of the proportion of recyclable components.
In addition to parts, Croatia’s automotive experts and innovators supply software solutions to renowned car manufacturers, an area that represents real opportunities for the future. The integration of ICT in automotive manufacturing is increasingly important as vehicles become safer, more efficient and more connected to our lives.
The Internet of Things (IoT) is key to this digital transformation, taking in everything from road safety and traffic reports to environmental issues. “Data can be used determine and reduce areas of congestion, which would drastically reduce pollution, energy expenditures and unwanted emissions,” says Jelušić Kašić.
“Implementing IoT will also lead to better road conditions, with vehicles transmitting information about road-maintenance needs to the cloud, where it can be mined for data.”
Croatia’s automotive industry has reached a fork in the road. But collaborating with technology companies and the right investors will help OEMs navigate these challenging and changing times.