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Economic News

22 Jul 2010
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On September 22 over a hundred cyclists congregated in front of the Alexander Nevski Cathedral, in central Sofia, to celebrate European Mobility Week but the message of the initiative, to find alternatives to automotive transport, seems lost on the majority of Bulgarians.



Queues of cars at government registration sites are common in Sofia, with between 700 and 800 registering every day in the capital alone. While used cars continue to dominate total sales, demand for new and luxury car cars is also on a steady rise and salesrooms are being built across the nation.



In the first eight months of this year, 31,920 new cars were sold in Bulgaria, an increase of 23.8% on the same period last year. Truck sales also increased dramatically year-on-year from 1078 for the first eight months of 2006 to 1703 this year. This growth in new car sales was the fourth largest in the EU behind Latvia (53.4%), Lithuania (34%), and Estonia (30.3%). The country has no domestic passenger car production.



In late September Porsche BG, the local authorised dealer for Audi, opened an Audi sales and repair facility in Bozhurishte, a suburb of Sofia. With a total footprint of over 21,590 sq metres, the complex is one of the automaker's largest in Europe. The expansion follows recent heavy investment from a number of auto importers looking to take advantage of the upswing in new car purchases. In June, Sofia France Auto, the main importer of Peugeot opened an 11m-euro showroom in Sofia and announced plans for a further $37.7m to be spent on 11 new sales centres across the country before the end of 2008. In August, Toyota Balkans, which distributes Toyota vehicles in Bulgaria, Macedonia and Albania, announced it would invest $35m in expanding its existing sales and repair centre in the capital and building two new ones.



These investments reflect the potential of the new car market in a country of almost 8m people. Despite the high growth rate, the number of new car sales is still the lowest in the EU. By comparison Slovakia, with a population of 5.5m, saw sales of 59,084 units over the same period while in Denmark, which has a similar population to Slovakia, this figure was 156,275.



To a large extent this disparity is the result of Bulgarians' continuing appetite for inexpensive pre-owned cars from the EU. Since the country's entrance into the EU this past January, the lifting of import taxes has made used vehicles affordable to a large section of the population for the first time. In the first six months of the year, 150,000 pre-owned vehicles passed into Bulgaria, outnumbering new car sales by six to one.



According to Stoyen Zhelev, chairman of the Bulgarian Car Importers Union, many of these cars would not meet safety and environmental standard in other EU countries. Statistics from the ministry of transport show that the average Bulgarian car is 19 years old. Zhelev told local press the country "runs the risk of becoming Europe's car dump."



Given the problems caused to public health and safety by the country's aging fleet the growth of new car sales can be seen as a positive sign. The key driver is Bulgaria's continued strong economic performance. "In recent years steady GDP growth of around 6% has helped raise income levels and with the growth of credit options more Bulgarian's are willing to take out car loans," Mike Lewkowitz, managing director of Orchid Sports Cars Bulgaria, which imports Porsches told OBG. While Toyota, Ford and Peugeot are the market leaders for new cars, many industry experts believe demand for luxury cars is set to rise.



"In recent years the true potential of the luxury car market has become clear," Lewkowitz told OBG. "Bulgaria is experiencing strong economic growth but it is also a country with an inherent love of cars, more so perhaps than other Eastern European countries. There is a growing demographic group of well travelled nouveau-riche who are familiar with global brands and demand top-quality luxury vehicles."



"Over the coming years I would expect to see year-on-year growth of new car sales in the high tens or early 20s in percentage points," he told OBG. Toyota Balkans' senior brand and public relations manager, Assen Vassilev, agreed. He told local press, "The market has been growing by some 30% to 45% in each of the past four years. If this growth continues, it is possible to have 100,000 or 110,000 cars sold in Bulgaria in 2010."



The question remains whether this growth is healthy for Sofia's increasingly cramped streets and strained transport system. In September, as Sofians returned from their summer holidays, many in the city complained that traffic was worse than ever. "It is true that Sofia, and Bulgaria in general, lacks the infrastructure to deal with the increasing number of vehicles on the roads," said Lewkowitz. "But then so does India, China and Russia - and in all these countries car sales are booming." With limited tram and bus services, parking spaces so scarce that cars routinely encroach on the sidewalks and with fatal auto accidents frequently in the headlines, perhaps the cyclists assembled outside the cathedral had the right idea after all.

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