Bulgaria Autos Report Q1 2008

Strong economic growth, rising incomes and the growth of credit options for car loans have combined to make the Bulgarian car market one of the fastest growing in Europe, according to BMI's latest Bulgaria Automotive Report.

BMI estimates that overall growth in the automotive market was 14.6% in 2007, down from 29.7% in 2006 due largely to the initial impact of EU membership on the used car market. The slowdown was expected, mirroring the trends seen in the 2004 group of accession states, which saw a sharp decline in new car sales as a result of a surge in used vehicle imports caused by trade liberalisation. BMI believes annual automotive sales growth will return to at least 20% from 2010, with annual car sales exceeding 109,000 units by 2012. In comparison with other countries in Central and Eastern Europe, this is still low in per capita terms. While the macroeconomic situation should be supportive of consumer demand for new vehicles, Bulgaria faces significant infrastructural constraints.

The Bulgarian market remained highly competitive in the first three quarters of 2007, with the leading brand Toyota achieving an 11.67% stake, putting it more than 2% ahead of its nearest rival Ford on 9.4%. Toyota was second place to Peugeot in 2006, but the French brand has slipped to third place as the Japanese firm has strengthened its position. Autos importers are increasing their number of showrooms and after-sales facilities in an effort to increase their share of Bulgaria's burgeoning sales.

In terms of domestic production, the focus is very much on the automotive components industry. A large proportion of output (over 60%) is exported, often to the booming assembly markets of larger CEE neighbours. With Romania's automotive industry taking off, the Bulgarian parts sector is attracting high levels of investment. From the beginning of 2008, the Montupet plant in Rousse will manufacture 230,000 aluminium cylinder heads per annum, with Renault and Dacia ordering 200,000 and 80,000 units respectively. Lear Corporation, which manufactures automotive interior systems and components, has also indicated it would like to build a plant in Bulgaria and is examining a number of sites.

While Bulgaria's automotive production capacity is exclusively focused on the supply sector, the country has not given up on the idea of attracting investment to set up its own automotive plant. In February 2007, Sofia Technical University unveiled its own concept car called the Univers, a low-cost model designed to compete against Romania's Dacia Logan. Harald Leschke was involved in the university's project to design a five-seat car that would sell for EUR7,500-8,500. The project is sponsored by Mercedes, Brabus and Samsung and a number of Bulgarian firms. In May 2007, the financial and industrial firm AKB Fores HAD offered to finance and assemble the model at its three factories in Sliven. Bulgaria is now a prime investment destination for autos majors, but it remains to be seen whether a Bulgarian-engineered car has the capacity to compete against budget rivals Dacia and Skoda.