One hundred and thirty kilometers southeast of Belgrade, Serbia, is the town of Kragujevac. Situated on the right bank of the river Lepenica, and once dubbed the Serbian Detroit, Kragujevac is most famous as the home of the Zastava Group, Serbia's oldest industrial complex; the pride of the former Yugoslavia, and now the last of the independent automakers in the region.

Czech automaker škoda has long been under the control of Volkswagen; Romanian Dacia, under Renault. Neither of these brands, nor its facilities, has any substantive input in the cars it builds, or much say over production or sales. The Czech Republic; Slovakia; Slovenia, and Turkey have all attracted foreign investment. Wartburg and Trabant, of the former East Germany, have long donated their resources to building Opel and Volkswagen vehicles.

Meanwhile, Serbian automaker Zastava Automobili, with a tradition of automotive production spanning 55 years, continues to push forward. On August 26^th, 2008, the company celebrated its 55^th anniversary.


In 1953, Fiat was picked as Zastava's foreign partner. The rest is history. Through June 2005, Zastava Automobili had produced more than 4 million cars. It had exported over 700,000 cars to 74 countries.

In 2008, Zastava intends to make 18,600 cars.

This annual production figure is dramatically reduced over what it was just twenty years ago, when then-Zavodi Crvena Zastava manufactured more than twelve times as many vehicles, and over a five-year period exported 145,511 Yugos to the United States.

Kragujevac and its Yugoslav-wide supplier network were regular innovators. A close relationship with Fiat guaranteed Zastava technical competence. The rear-wheel-drive Fiat/ Zastava 1500 of the '60s was declared by the German Auto Motor und Sport magazine to be "currently the best sports sedan in the class," after it regularly beat the BMW 1500 in test after test.

Some will say that Zastava's success was context-bound, in that Yugoslavia maintained a 41% tax on imported cars, thus the domestically-produced Zastavas were the most affordable automobiles available. Yet the Zastava was also considerably cheaper than the Yugoslav-built (tax-free) Volkswagen Golf (of Sarajevo, Bosnia-Hercegovina), or the various Citroens and Renaults that were produced in Slovenia.

Affordable to buy and run, Zastava's cars put a nation on wheels. They were far ahead of competitors from the Eastern Bloc (of which Yugoslavia was not a part), including Lada; Moskvich; Skoda; Trabant, and Wartburg, and they even managed to show the West and the then-nascent Japanese a thing or two.


After all, Zastava - thanks to Fiat - had front-wheel-drive in 1971, well before Japanese manufacturers had even contemplated it.

When Zastava engineers added a five-door hatch to create the Zastava 101, based on Fiat's revolutionary 128, the model sold so well that Fiat must have been wondering why it had not itself launched such a car. The "stojadin" or "kec" (as it was nicknamed) was more practical than its Fiat cousin, and found eager markets across Western Europe.

The arrival of the Yugo in America, in the '80s, marked an economic shift of global importance in the small-car market, as the USA Today readily acknowledged in September 2007, naming the Yugo one of the 25 Most Influential Cars of the past 25 years. Recall that the Yugo forced General Motors to sell the Suzuki Swift as the Chevrolet Sprint, while Ford responded by creating the Festiva from a Korean variant of the Mazda 121. The Yugo opened the door for Korean Hyundai and Kia, which had in 1985 looked on keenly as Kragujevac's smallest car ventured Stateside.

Through 1991, Zastava could claim that its Yugo cars were in high demand on the world market. Seeking an increase in yearly output of 50%, the firm hoped to introduce a completely new family of products, beginning with the 1988 Florida, at the forefront of its class.

Yet, after 145,511 Yugos had found homes in the United States, the Yugoslav Civil War dashed Zastava's hopes of developing its image and market.

The Fall of Yugoslavia changed everything. A difficult fifteen years would follow.

Following its departure from the American market in mid-1991 due to the start of the Yugoslav Civil War, Zastava lost several key suppliers in the ongoing hostilities. The company strived to maintain production for its home market. When NATO became involved, Zastava found itself a target. Employees tenaciously formed a round-the-clock live shield. 160 were wounded, and 160,000 square meters of damage was recorded in two nights of bombing.

Yet the attempts of Zastava workers to save their factory from destruction succeeded. As resilient as ever, Zastava produced 8,800 cars in the first half of 2000, and would make 15,000 that year, exporting 4,000.

In 2005, against heavy pressure from imports, Zastava held 35% of the Serbian automobile market.


Today, Zastava retains the ability to produce 60,000 automobiles per year, par with Italy's Carrozzeria Bertone of Turin. The company's products continue to emphasize motoring on a budget, with cars starting under 4,000 euros.

The Skala 55 is the world's second most-affordable car.
The Koral In is fourth.
The Florida In takes eighth place.
The Zastava 10 is not far from fifteenth.

The Zastava brand stands for affordable, durable cars, priced at under 10,000 euros, promising ease of maintenance and honest value.


In an era of corporate mergers and mass attempts for short-term profit with the most prestigious of brands, Zastava's tenacity and the sheer honesty of its simple, resilient cars have earned respect. Moreover, no other company so symbolizes Serbia's industrial potential.

It is clear that fifteen years of hardship cannot be surmounted overnight. Yet we can be buoyed by the sales results of the new Zastava 10, launched in March 2006, and finding more than 9,000 buyers through the end of the 2007. Zastava's newest is becoming a regular sight on Serbia's roads. In June 2007, the Euro 4 model began emerging from Kragujevac's own production lines, in an operation praised by Britain's Autocar magazine as the most modern in the region. The quality of the new Zastava 10 is, in Autocar's estimation, better than that of Fiat's original, thanks to modern equipment in which Zastava has invested 15 million euros (Autocar, October 31st, 2007).

It bears noting that when Britain left its auto industry to decline, that industry fell. Meanwhile, the Japanese have continued to invest in their own. No less than the French government recently promised to invest 400 million euros to find jobs for PSA/ Peugeot-Citroen workers who will no longer be needed after 2008. That government has also promised 200 million euros for the development of hybrid autombiles.

The Zastava is the most complicated product that Serbia makes. The revival of Serbia's automotive industry is vital to the revival of its economy. Serbia's national deficit stood at 5.36 billion euros in 2006, an 11% climb over 2005. The country's yearly national deficit has never been under 2 billion euros, and in the last fifteen years the bulk of it has been spent on consumer goods, rather than invested in development. The outflow of foreign currency is a serious problem for an economy which has only recently begun to find stability. Used cars have flooded into Serbia, both legally and illegally. It is impossible to verify their true mileage and history.

As Serbia's oldest industrial firm, Zastava has played - and will continue to play - an important role in reducing the national deficit, particularly as it relates to the new, domestic automobile versus the used and abused import. Exporting the Zastava 10 across the region will be an equally important.

It will be up to Kragujevac to demonstrate that it is willing and able to produce an affordable car which can meet the needs of today's consumer.

To paraphrase a popular Fiat line from many decades ago, almost 4 million people across the former Yugoslavia - and 145,511 Americans - can't be wrong!

Zastava's workforce, for as much upheaval as it has endured in the fifteen years of war and political strife that has gripped the Balkans, has long been capable of building a solid, sub-10,000 euro automobile that is dependable; fuel-efficient, and a good value. It is in this market segment that the company's future will be made.


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