The automobile part-and-component-production sector’s expansion in recent years has become a motor of the Bulgarian industry and economy. Since the Japanese company Yazaki’s investment some 15 years ago, and following Bulgaria’s EU accession in 2007 – and thanks to the common European market and the globalization of car production – Bulgarian car part manufacturers have successfully integrated into European and international supply chains as suppliers and subcontractors for global brands such as BMW, Mercedes, Renault, Nissan, Audi, Ford, Porsche, and Tesla. Nowadays, 80% of all cars have parts produced in Bulgaria. In some specific segments, Bulgarian manufacturers have become absolute market leaders - for example, 90% of the airbag sensors in all European cars are produced in Bulgaria.
For several months the decision of Skoda/Volkswagen, which put Bulgaria on the short list for its future plant for several of its brands, has been expected. If the investment happens in Bulgaria, this would be the first large-scale investment in the production of finished cars, and, at more than EUR 1.5 billion, it would be on a completely different scale than previous investments. The Bulgarian government is also currently in discussion with leading electric car and battery manufacturers from South Korea, the UK, and France regarding potential investment in a high-tech factory in the country.
Following the rapid development of the automotive sector in Bulgaria, the leading car dealership in Bulgaria, Moto Phohe (which sells Fords, Volvos, and Range Rovers), was successfully acquired by Japan’s Sumitomo Corporation holding company.
Boom in Logistics and Transportation
The Bulgarian government has put deliberate effort into boosting the logistics and transportation sector in Bulgaria by attracting leading international players.
The Plovdiv airport concession was awarded to China’s HNA, and in 2019 the concession of the Sofia airport – the largest PPP in Bulgarian history – was made available, with a number of foreign investors – including GMR from India – participating in the highly-contested tender. It is expected to complete in 2020 and to bring investments in excess of EUR 1 billion and a new terminal. This success follows a significant increase in the number of passengers flying to and from Bulgaria’s key transportation hubs: Sofia, Varna, and Burgas (with airports operated successfully for ten years by Fraport).
The underdeveloped railway sector in Bulgaria has had a renaissance over the last few years, with major parts of the rail infrastructure projects awarded to leading international companies. China Communications Construction Company, Ltd. (one of the largest construction companies in the world) won the tender for the construction of Elin Pelin-Kostenets high-speed railway in Bulgaria, marking a major milestone for the sector. The construction of this section of the Bulgarian railway system is expected to start in 2020 and to finish by 2022.
Transportation of natural gas was the real highlight of 2019 for Bulgaria with both the interconnector between Greece and Bulgaria and the extension of the TurkStream pipeline bringing in over EUR 2 billion in investments. With suppliers such as Corinth Pipeworks S.A. (Greece), Completions Development Sàrl (Luxembourg), and many others, these projects will develop over coming months and will contribute to the diversity of the supply.
Despite the fact that the road construction sector in Bulgaria continues to be dominated by local contractors, some of which are state-owned, several projects are ongoing, with the extension of the Struma and Hemus Highways being the most notable. The Toll System project, which has been delayed for quite some time upon its development by an Austrian company, is expected to be put in operation in 2020, thus boosting the income from trucks and other vehicles passing through Bulgaria.
Construction of the Shipka and Petrohan tunnels constitute major challenges for the Bulgarian civil construction and transportation sector, which lacks the necessary capability, and most likely some major foreign players will participate in these upcoming tenders.
Sofia’s hosting of the recent 16+1 Summit of countries from Eastern Europe and China and Bulgaria’s active participation in the One Belt One Road initiative provide further opportunities for investments into the automotive, logistics, and transportation sectors of the country.
By Kostadin Sirleshtov, Managing Partner, CMS Sofia