Automotive Supply Chains in North Macedonia

This chapter examines North Macedonia’s automotive supply chains as a case of selective industrial upgrading within a small, post-socialist economy. It analyses how foreign direct investment, Special Economic Zones (SEZs), and donor-led reforms have shaped a dualistic structure characterized by export growth but weak domestic linkages. The sector has become the country’s leading manufacturing and export engine, yet knowledge transfer, supplier upgrading, and technological learning remain limited. Using the Developmental Network State (DNS) framework, the chapter explores how governance fragmentation, donor dependence, and the absence of coordinated policy have constrained the country’s capacity for capability accumulation. It identifies structural barriers in skills, finance, and technology that reinforce enclave-based growth and limit the potential for transformation. The analysis highlights the need for networked governance mechanisms that connect foreign investors, domestic firms, and public institutions through supplier development programs, learning platforms, and feedback systems. The chapter concludes that sustainable industrial transformation in North Macedonia requires shifting from an investment-driven to a capability-driven strategy that embeds learning and coordination across the production system, offering lessons for other Western Balkan economies pursuing integration into global value chains.