By James Podles
Want to drive David Beckham’s luxury BMW X5 through the streets of Tirana? You could have the chance: unless the Real Madrid midfielder claims his car from the Macedonian police, who seized it at the Albanian border two weeks ago, the armor-plated SUV, stolen in the Spanish capital last April, will be sold at public auction.
Such incidents do absolutely nothing to improve the commonly-held image of Albania as the car-theft capital of Europe. Although most foreigners’ perception of the automobile industry in Albania begins and ends with this stereotype, the country has a unique and tangled historical relationship with the car. From the Communist era, during which cars were reserved as the sole privilege of high-ranking Party Officials; to the neo-liberalism of the early 1990s, when borders and markets were opened to a huge influx of foreign goods, both legal and illegal; to the present time, in which international manufacturers and distributors have established a small yet growing base in the country, the Albanian automobile market has been intertwined with and often mirrored the country’s political and economic development.
“Like Letting a Bull Loose in the Streets”
During the Communist era, private cars were unheard of. Driving was reserved for party officials; before 1991, there were only about 600 cars in the entire country, most of them Russian GAZes and Polish Warszawas. People relied on utterly unreliable buses to travel between towns and around cities. After the liberalization of the early nineties, cars from neighbouring countries began to flood into Albania. The impact of such a sudden inrush of vehicles into a country with no traffic signals, vehicle registration, modern highways, or even driver’s licenses (not to mention a total absence of drunken-driving laws) dramatically changed the social landscape of the entire country, nowhere more so than in Tirana.
In the years before the opening of the border and the loosening of economic and mobility constraints, all of the city’s public social interactions were centered around the xhiro, or evening walk. Romance and intrigue, business and social interactions: everything took place between six and nine in the evening on the boulevard stretching from Sk쯤erbeg Square to the University of Tirana. The xhiro was, for the entire city, the axis around which social life revolved; the xhiro offered freedom.
The arrival of the first cars on the boulevard created a pandemonic disruption of the xhiro. Pedestrians were unsure how to act towards these intruders; drivers were unsure of how to treat pedestrians. Vehicles tried to act like pedestrians, threading their way through clusters of people; people tried to ignore vehicles as they encroached on the previously pedestrian-only space.
This disruption proved to be the beginning of the end of the institution of the xhiro. Pedestrians, finding their social space disturbed, began to move into the newly-opened caf곮 As more cars arrived, more caf고opened, and more pedestrians left the boulevard for the safety of the coffee houses. Eventually, the balance of the social mass tipped far enough towards the caf고that the displacement and eventual disappearance, of Tirana’s xhiro was inevitable. This disappearance was perhaps the most sharply evident manifestation of the speed at which the sudden entry of the automobile into everyday life changed Albanian society.
“Your Car is Already Here”
After the country’s borders were opened to imports, a flood of Western European cars began to cross into Albania. Some of these were legally imported by authorized car dealerships. Some were traded on the so-called grey market: bought outside of the country and driven back to Albania, these vehicles were then sold by one individual to another, avoiding taxation. The great majority, however, were black-market automobiles stolen in Western Europe and smuggled across the border.
As the years passed, the black market became more sophisticated and more deeply entrenched. Stolen-car dealers printed catalogues of their merchandise (“ordering” a popular car like a Fiat only took a day or two; a rarer vehicle like a Porsche might take a few weeks to arrive). In 1999, the then-Minister of Public Order’s car was impounded as stolen property as he tried to cross into Greece to attend a conference on cross-border crime. A system of collusion was developed: cars (complete with keys and legal papers) were “stolen” in Germany and other Western European countries, then driven to Albania for no-questions-asked re-registration, allowing the cars’ original owners to claim compensation from their insurance companies. While a national vehicle registration was eventually introduced, checking a vehicle’s VIN against the European database of stolen cars was not (and still is not) part of the process. Stolen cars could effectively disappear.
At the same time, however, legal automobile dealers began to set up establishments in Albania. The company which would become Mercedes-Benz Auto Star was founded in 1991 by Basri Rruka; it was the first or one of the first private companies in the country. Originally an importer of household appliances and American tractors, in 1996 it was granted the exclusive rights to import Mercedes-Benz vehicles. Other entrepreneurs soon followed suit.
Presently, legal dealerships still have only a small section of the market. Although statistics are, of course, inexact, car dealers state that informal sales still account for a significant proportion of the new car sales in Albania. For example, of all the BMWs that entered the country in 2006, says BMW Sales Manager Altin Zhurda, his company imported only 13%. Even after taking into account legally owned cars which are sold from one individual to another, he still estimates that black-market transactions make up the majority of sales of new BMWs.
Mercedes-Benz Auto Star estimates that only 2.5% to 3% of the 142,000 Mercedes which have entered the country have passed through his dealership, rather than the desired 25%-30%. It should be noted, of course, that these figures deal only with the sales of new cars and do not take into account the thriving used-car market.
Competition with the black market is such a major problem that the Albanian Association of Legal Car Dealers (Shoqata e Distributor췥 Ligjor롴롍akinave t롒eja n롓hqip쳩) has petitioned the government (most recently, the offices of Prime Minister Sali Berisha, Minister of the Interior Sokol Olldashi, Minister of Finance Ridvan Bode, and Minister of Transport and Telecommunications Lul컩m Basha) to address this crisis. The Association, headed by Z. Rruka, has written several letters calling the government’s attention to the various ways in which the presence of such a large black market affects the country: illegal car sales not only throttle the development of the legitimate automobile industry, but also cost the state at least 60 million in lost taxes on the 400-million market. Additionally, the prevalence of uninspected, unregulated automobiles contributes greatly to the country’s high level of air pollution (approximately 10 times higher than the European standard) and contributes negatively to international perceptions of Albania. The association estimates that up to 95% of Albanian vehicles are traded on the black market at prices anywhere from 50% to 20% of their real market value.
To reduce the presence of this black market, the association suggests the creation of an administrative unit which would act as a liaison between the government and the automotive industry, allowing them to combine and co-ordinate their resources and efforts. Additionally, it emphasizes the urgent need for the government to create and strictly enforce regulations for the automotive market, as it has for other consumer markets (alcohol, tobacco, technology, and so on). The association points out that while any type of collusion between government employees and automobile smugglers exists, especially with regard to the re-registry of foreign automobiles, it remains impossible to stem the flow of black-market cars into the country. Although Albanian legitimate car dealers have invested in bringing their companies up to European standards, and are perfectly able to meet the demands of the market, further growth will be difficult if competition from the informal market remains so strong, states the association.
Growth of an Industry
While the market for new, legally obtained vehicles is still relatively small compared to the rest of Europe, it has exhibited slow but steady growth within recent years. And as consumers’ ability to legally buy competitively priced vehicles grows, the cheaper but riskier market for illegally obtained cars is slowly but steadily shrinking. Mercedes-Benz, according to Z. Rruka, sold 80 cars in 2004, a number which increased to 210 in 2006. Similarly, sales of legally imported BMWs nearly doubled over the same period of time.
One factor which has aided the growth of the legitimate market is the relatively new possibility of obtaining cars on credit rather than by paying cash. Since 2000, Albanian banks have offered automobile loans to their customers. Presently, lease agreements, made either through banks or through car dealerships’ leasing departments, account for anywhere from 50% (in the case of Peugeot) to 90% (in the case of Mercedes-Benz) of sales. As lease and lease purchase agreements both bring car ownership within the financial reach of more consumers and bolster the perception that new-car ownership is both feasible and affordable, they have been a major cause of the increase in new-car sales.
Legitimate dealers also stress the reliability of their products compared to that of dubiously-obtained cars. The immediate savings involved in purchasing a black- or grey-market car may seem attractive to buyers: a new BMW, according to Z. Zhurda, can cost over 30,000 after taxes, while the same model can be bought on the black market for half of that amount. The Association of Legal Automobile Dealers estimates an even greater gap between real and black-market value, writing that vehicles worth from 60,000 to 80,000 can be bought for 15,000. Legitimate dealers, however, point out that these lower prices can be a false saving, as the cars come with no guarantee quality, no warranty, and no service agreement.
Automobile companies are currently focusing on marketing the brands and models that are best-suited to the often unique automotive environment of Albania. BMWs (especially X5s and the larger sedans) are highly sought-after, as are Mercedes-Benz sedans; both of these brands are known for their reliability under rough conditions. The condition of Albania’s infrastructure, unfortunately, often imposes limitations on the types of cars which can be successfully sold in the country. General Motors is reluctant to ship diesel-engined cars to Albania due to concerns that using Albanian diesel, which often varies widely in quality, could damage its new, more technologically advanced models, voiding their warranties, says Valbona Shkopi of Opel-Chevrolet Noshi. The Porsche Group, according to brand manager Eno Turku, forgoes importing relatively fragile Lamborghinis into the country, concentrating rather on marketing ˫odas, Audis, and Seats as better suited to the rugged conditions of Albanian roads (while the company does not sell Porsche-brand cars at its showroom, it will order them on request; not surprisingly, the four-wheel-drive Cayenne is the most commonly ordered model).
The Future
The automotive industry has, by now, become solidly established in Albania. All of the major international car manufacturers have representatives in Tirana; nearly all of them are independent of their parent companies and are run completely by Albanian managers. Many of them have expanded or are planning to expand beyond the capital to meet the needs of growing markets elsewhere in the country. Mercedes-Benz, the most well-established importer, has branches across the country, from Durr쳠to Gjirokastra, and plans to expand to cities like Vlora, Shkodra, and Kor衮 The Porsche Holding Group, whose brands include Audi, Seat and the newly-introduced ˫oda, plans to open branches in Elbasan and Fier in 2008. Volkswagen, Peugeot and Renault-Nissan dealerships have also been established in Tirana. New car models are being introduced to the Albanian marketplace: ˫oda will launch 3 new models (including the Roomster and a new version of its popular Octavia) next year; Peugeot recently introduced the 207 and plans to begin selling the 206 in December 2006 or January 2007, says Sales and Marketing Manager Genard Zela.
This year’s loosening of import regulations and the elimination of customs duties for European automobiles has provided another area of opportunity for growth. Small-scale entrepreneurs can now privately import cars for resale within the country. These entrepreneurs, who are able to operate without the overheads of the large-scale dealers, can provide a legal source of low-priced vehicles. Additionally, they can operate in a more decentralized way than can the major dealerships (which are all based in Tirana); needing no more facilities than a parking lot or even just a piece of roadside, they are able to easily sell low-priced cars anywhere in the country. An informal “network” of these entrepreneurs may prove to be a major factor in eventually supplanting the black market.
The future growth of the Albanian automobile industry depends, perhaps more so than any other industry, on the political and economic realities of the country. While current market trends exhibit a steady (albeit fairly slow) growth, sales of new, legally imported cars still make up a small percentage of the market compared to those of other countries in the region (Z. Zela estimates that 70% of car sales in Albania involve used cars, compared to an average of approximately 10% in the rest of the Western Balkans). The major obstacle to further growth is, as noted, the prevalence of black-market sales; legitimate car dealers, however, have expressed an attitude of cautious optimism, hoping that, as connections between Albania and the European Union are strengthened, government corruption, especially corruption related to the importation of vehicles, will decline. Additionally, as standards of living and average incomes rise, car dealers hope that the purchase of black-market vehicles will lose its attraction and will be supplanted by the purchase of legitimately acquired imports. In the next few years, they expect that car smuggling will be relegated to the status of a minor problem.
