Bulgaria Autos Report Q4 2009

The worsening economic downturn in Bulgaria continues to squeeze the auto market. With a shortage of consumer loans, demand for passenger vehicles has fallen. Meanwhile, the freeze on construction has triggered a plunge in commercial vehicle sales. In the first five months of the year, a total of just 12,432 new vehicles were sold in Bulgaria, according to the Sofia News Agency. That represents a 50.3% fall in sales from the same period last year.

Economists claim Bulgaria failed to use the economic boom years to make structural changes to improve its competitiveness and productivity. This missed opportunity may have long-lasting implications on the country’s attractiveness as an export base for foreign producers. Already, foreign investment has fallen across the board, and auto investment is unlikely to escape the downturn. Foreign direct investment is projected to dive 50% this year to roughly EUR3.5bn, according to Reuters.

One area that is less gloomy, though, is the auto parts sector. The ongoing economic crisis has hit profits at auto parts makers and prompted them to scale back production, but there are signs that parts makers are still interested in producing in Bulgaria. This is evident by German parts supplier Ixetic’s newly constructed facility in the Rakovski Industrial Zone near Plovdiv, where the company began production in May. The supplier is a major manufacturer of hydraulic and vacuum pumps and supplies brands ranging from Audi, BMW and Daimler to Porsche, Renault, Toyota Motor and Volkswagen (VW).

While Bulgaria has weathered the economic crisis somewhat better than some of its neighbours, it is still feeling the sharp sting of the global recession. Analysts told Bloomberg the GERB Party, or Citizens for European Development of Bulgaria, which won elections in July, may be forced to seek an emergency loan from the International Monetary Fund in order to avoid a budget deficit.

The shuttering of foreign companies is leading to mass layoffs. The jobless rate climbed to 7.3% in June, up from 5.9% in June 2008, an Agence France Presse (AFP) report said. Furthermore, analysts say the actual unemployment rate may be much higher than official statistics suggest due to the sizeable underground economy. The labour situation shows no signs of staging any kind of recovery quickly.

Some 38% of Bulgarians are worried about losing their jobs in the next six months, according to a statefunded poll conducted in June.

Against such a gloomy economic outlook, we see little hope of sales reviving this year. We project sales of just 51,674 new cars and 17,225 commercial vehicles in 2009. However, we expect an economic rebound next year and forecast new car sales reaching 76,471 units by 2013. By the end of the forecast period, we see the figure for medium and heavy commercial vehicles at 25,490 units.