If anywhere in Europe the engineering and technology industries are thriving despite the challenges of pandemics and disrupted global supply chain – one of them is right in the centre of the continent – Lithuania. The country’s economy has shown its resilience to the pandemic, the technology industry is experiencing strong growth and thus attracts foreign industrial investments as well as strengthens international business ties. Finland, known there for its high-tech and innovative services sector, is seen as one of the directions for further development of partnerships and cooperation between the North and the Baltics.

 

Successful recovery, growing exports

In comparison to other EU member states, Lithuanian economy has demonstrated exceptional resilience to the Covid-19 challenges. Lithuanian Statistics Department indicates that in 2020 the annual change in Lithuanian GDP was exactly 0 % – which means that economy recovered very quickly from the spring 2020 lockdown. What is more, in the first three quarters of 2021, Lithuanian economy has already exceeded the pre-Covid-19 level, as the GDP reached 5,2 % above the corresponding level of 2019.

This rapid recovery of Lithuanian economy is largely due to the favourable structure of GDP: the economy is driven by manufacturing, which is the largest sector here, generates around 20 % of the country’s GDP and is the locomotive of Lithuanian export.

As claimed by LINPRA, the Engineering and Technology Industries Association of Lithuania, it is true, the whole manufacturing sector is the driver in the post-covid situation. And part of it, the specific engineering and technology industries sector, also plays an important role. Lithuanian engineering industry is demonstrating a big growth: in 2020-2021 Q1–Q3 production output in the Lithuanian engineering industry rose by 21% and is almost 20% above the 2019 Q1–Q3 level. About 75 % of its products are exported, which accounts for ~20 % of the total country’s exports.

According to the director of association, Mr. Darius Lasionis, Lithuanian engineering and technology export volumes are growing annually. In 2020 it reached 3,4 billion, out of which almost 6 % were directed to Finland and could increase even more:

“Being in the centre of Europe and with the current companies’ capacities we have the potential to become the small European manufacturing hub, able to correspond to the needs of European manufacturing leaders. Lithuanian engineering SMEs have much to offer, are ready to welcome reliable partners and find new export markets. Finland is one of the TOP directions for Lithuanian manufacturers; Finnish companies would benefit not only from our advanced production, but also from our geographical location”, – says Mr. D. Lasionis.

Partnerships with Finnish companies in particular are of interest in Lithuania. The country aims to provide a cost-effective production platform for Nordic expertise in both high-tech and high-productivity innovation. Its central location in continental Europe and strong existing logistical links to Finland as one of the main export countries are at the same time Lithuania’s advantages and ambitions.

 

Part of Lithuanian outward FDI – goes to Finland 

Besides exports, Lithuanian companies are currently increasing their focus towards outward foreign direct investments. Statistical data shows that in total, Lithuanian companies invested almost 9 bln. EUR outside Lithuania. Compared to the beginning of Covid pandemic, Lithuania’s outward investments rose by 40 %. Manufacturing sector is one of the sectors where increase in this trend is clearly observed: compared to the beginning of Covid, Lithuanian outward FDI into manufacturing sector rose by 6,5 % and account to 157 mln. EUR.

Talking specifically about Finland, one of the recent significant examples is the case of Outotec Turula Oy, Finnish manufacturing company, located in Outokumpu, bought by one of the leading Lithuanian engineering and metal processing companies, providing machinery / equipment manufacturing services to brands that are well-known worldwide (“Arginta Engineering”).

According to the company’s CEO (Mr. Tomas Jaskelevičius), this investment and acquisition of a Finland-based plant has a significant impact on the company’s development. It is expected, that this transaction will enable to increase the production capacity as well as turnover and offer company’s customers, located mostly in the Nordic countries, a wider range of production services.

At the same time, for Outotec Turula Oy the target was to find a new owner for the Turula workshop, a partner who would be fully focused on manufacturing and engineering with the ability to develop and grow the operations to better meet the future needs of all its customers. Both companies found each other favourable to provide development opportunities, exchange employees’ experience and learn new skills from each other.

 

Marine sector

Favourable logistic advantage of Lithuania is the access to the Baltic Sea and an ice-free seaport in Klaipėda, which is the most important and biggest Lithuanian transport hub, connecting sea, land and railway routes from East to West. Therefore, maritime industry is extensively developed, has rich traditions and is purposefully making a way in the competitive international market.

One of the largest industrial holdings in the Baltic Sea region, BLRT Grupp, consists of more than 50 companies across the Baltics, among which – the Western Shipyard Group, set in Klaipėda Seaport – has been one of the largest marine engineering corporations in Lithuania for already five decades.

In the last two years, the company’s capacity has strongly increased – the list of docks at Western Shiprepair in Klaipėda has been enlarged with two additional floating units, one of which is the largest floating dock in the Baltics. Now the company has the opportunity to take on an increasing number of ship repair and modernisation projects, accept larger vessels for repairs, which was not possible before. WSR is establishing sustainable cooperation with European customers, attracting a greater number of complex large-scale projects. Having secured a stronger position in the European maritime market, WSR is successfully competing with the major ship repair and building companies.

 

Innovation and R&D in Lithuanian manufacturing

Historically, a large part of Lithuanian engineering industry has been traditionally focused on subcontracting. But for the last years, Lithuanian engineering is devoting more focus and strongly shifting to innovation, product development and R&D activities.

According to Lithuanian Statistics Department, during the last 5 years R&D investments in Lithuanian manufacturing sector almost doubled (increased 1,7 times), while R&D investment in the engineering industry jumped 2,3 times. Engineering industry is becoming the main driver of R&D expenditures in Lithuanian manufacturing: in 2020, 62 % of total R&D expenditures in Lithuanian manufacturing sector were generated in the engineering industry, up from 45 % 5 years ago.

Similar trends are observed in regard to the innovation activities of manufacturing companies in Lithuania. Currently, 55,7 % of Lithuanian manufacturing businesses are involved in innovations activities, up from 30 % 10 years ago. In the Lithuanian engineering sector, the numbers are even higher: currently, 64,7 % of engineering companies are involved in innovations activities, up from 44 % 10 years ago.

 

Automotive / e-drive solutions

The increasing focus of Lithuanian manufacturing sector towards R&D, innovations and product development is driven by the factor, that Lithuanian manufacturing companies are becoming increasingly integrated into the EU value chains.

As manufacturing companies in the Western Europe and Scandinavia are becoming more innovative and invest more into R&D, Lithuanian manufacturing companies follow suit. The companies are stimulated to focus on development of innovative goods and services rather than to rely on contract manufacturing services and cheaper labour force.

One of the great examples of this trend is clearly seen in the automotive sector, where Lithuanians not only manufacture components for the European value chain, but also develop own automotive products and solutions.

Like elsewhere, automotive sector in Lithuania is also moving towards electric vehicles at an accelerated pace. Preparations for a rapid development of electromobility are taking place on a national level, and some of engineering companies strongly contribute to this trend.

One of the leading automotive companies in Lithuania (Altas Auto), engineering and producing mini and midibuses, for the last years is focused on development of electric buses, and is now ready to conquer the European electric vehicle market with its range of full-EV minibuses. The company created and can already offer extremely high-quality electric city and intercity buses.

4 fully electric models were precisely developed in cooperation with another Lithuanian innovation company (Elinta Motors), which is also developing own products for commercial e-mobility, is engaged in design, development, and production of drive and battery system products. All drive components including electric motors, battery modules and electronics have been developed in-house.

The first fleet of Lithuanian road ready EV Ecoline vehicles was manufactured in 2021 for the Latvian market. The company is gaining new customer orders from Finland, Germany, Norway. The plan is to reach at least 20 % of its sales with electric vehicles next year, and become fully electric by 2025.

One more innovation company in automotive sector in Lithuania (Vėjo projektai) are manufacturers of electric city bus (Dancer). Their originally-constructed electric city bus has been the first electric vehicle to be registered in Lithuania in 2021, and is also considered the lightest on the market

The two companies – producer of mini and midi buses (Altas Auto) and producer of city buses (Vėjo projektai) have recently combined their sales forces, with the goal of sharing engineering experience and representing the interests of sustainable transport at the national – Lithuanian – level, and jointly promoting their products in EU markets. Today, both Lithuanian electric bus manufacturers focus on different bus classes, so the combined sales forces will offer the customers a wider choice of vehicles – city and intercity buses. The expectation is to ensure the competitiveness of Lithuanian vehicles in foreign markets, and see their products in more and more European cities.

 

Additional information – Finnish success stories in Lithuania

Peikko Lietuva

Headquartered in Lahti, Finland, Peikko is one of the market leaders in the field of thin floor constructions, screw column connections, wind energy, precast, and monolithic reinforced concrete. The company established its Lithuanian operation, Peikko Lietuva, in 2006, and the operation has now grown to encompass three plants in Kaunas. Equipped with the latest machinery and equipment, Peikko Lietuva is able to integrate design and production processes. In 2018, Peikko Lithuania acquired ASD Konstrukcijos, one of the largest Lithuanian engineering solutions companies. The acquisition allowed Peikko to expand to Vilnius. The scale of production in Peikko’s Lithuanian facilities is one of the company’s highest, with only Finland and Slovakia producing more.

Paroc

Paroc Group is a Finland based international building, technical, marine and offshore insulation and acoustic products manufacturer with close to 2,000 employees worldwide. In 2012, the Paroc Group opened a Financial Services Centre in Vilnius, and its team of highly skilled financial specialists now provides services in 8 languages to Paroc companies in 14 countries.

Metso 

Metso, the leading Finish minerals and process technology company, successfully settled in Lithuania and launched a business service centre in Vilnius end of 2019. According to Metso representatives, Vilnius was chosen because of a strong culture of service centres supporting international companies. Moreover, Vilnius was also recommended by the colleagues and customers who already worked there, including the Finnish steel giant Outokumpu. Lithuania will be the main site where Metso will develop its process automation solutions. The latter solution is aimed at improving the effectiveness of the company’s business services and increasing the digitalisation, which is expected to support the growth of the entire corporation.

Metso Outotec’s goal is to expand its operations globally, and Lithuania was chosen as the investment destination, especially because of its logistical links with Metso Outotec’s customers. The location offers extensive logistical options to Europe, Russia, but also to the Middle East and Africa.