Bulgaria Autos Report Q4 2010

So far, 2010 has been a mixed picture for the Bulgarian car market. Car sales have continued to fall compared with 2009, but sales have once again begun to pick up. June 2010 has been the best month of the year so far, indicating that sales have begun to increase as the Bulgarian economy begins to recover from the economic crisis. Over the first half of the year 8,998 vehicles were sold – 5,854 fewer than the first half of 2009. In the first quarter sales shrank by 42.4% year-on-year (y-o-y), a figure which has slowed to 39.4%. BMI expects that many of the lost sales will be recouped in the second half of 2010. China's largest private auto firm, Great Wall Motors, has continued with its large investment in a production facility in Bulgaria.

This investment, which will likely spark the expansion of other sectors, has been welcomed by the Bulgarian government as an opportunity for increased ties with China. The two countries are building a close trading relationship and are working to increase Bulgarian exports to China, which have grown 238% in the first five months of 2010. This increasingly cooperative trade relationship bodes well for Chinese investment into the Bulgarian auto industry due to Sofia's focus on developing a successful components sector. Additionally, an agreement between the Bulgarian government and Zhejiang province has been concluded to encourage the development of business contacts and for investment in Bulgarian industry. The province is an important industrial centre, with an increasingly large auto industry.

Beyond the investment in new auto plants, the components sector has also shown signs of improvement. Monbat, the Bulgarian car battery supplier, has reported that sales are up 75.08% in the first half of 2010. This dramatically improved performance reflects broader global economic trends, as car manufacturers around the globe ramp up production to meet post-crisis demand. The increased demand has ensured that the firm's half year profits are up 41% to BGN10.7mn. The trend for further sales growth is expected to continue as the world auto industry begins to exceed pre-crisis production.

Overall, the economic situation in Bulgaria is also improving. In an interesting revision, the Center for Economic Development has increased its 2010 GDP growth prediction from 2009's prediction of negative 1.5% to positive growth of 1%. Growth of any sort should be a boon to the Bulgarian auto market as consumers begin to feel that the worst of the crisis has passed. Despite the market being dominated by the sales of used cars, this will also have a positive effect on new car sales. Growth is expected to pick up further in 2011 as the Bulgarian economy shakes off the worst aspects of the global economic crisis. The improving economy, growing global auto market and the improving ties between Bulgaria and China are promising developments for the country's auto industry and market. Overall, BMI expects car sales to increase 50% in the five-year forecast period to 2014. However, it is important to note that this figure still represents a 30% drop over 2008's car sales. The Bulgarian economy, like the world economy, is not expected to begin booming any time soon and car sales have been impacted by this as used cars continue to dominate the car market.