Bulgarian Automotive Market: Passenger Cars, Parts and Aftermarket

Bulgaria is, with a population of 7,7 mio., a medium market in Central and Eastern Europe (“CEE”). GDP per capita in 2007 was 3.747 EUR and average income was at 217 EUR / month, making Bulgaria one of the poorer countries in CEE. However, with around 5% GDP growth rate at constant prices, Bulgaria’s economy is growing faster than that of most other European countries. In addition, there is a substantial grey economy in Bulgaria.

Bulgaria’s car penetration is one of the highest in CEE and just about 20% lower than for example in France. While the parc was growing at about 10% annually over the last years, growth will reduce to about 3%. The car parc today is relatively old. Bulgarians, however, will start replacing very old cars through newer ones.

Since Bulgaria became a member of the EU in 2007, imports of used cars increased dramatically. The imports reached an all time high in 2007, mainly consisting of relatively old and hence very cheap cars.

Notwithstanding this rapid increase, the new car market is also growing continuously. During recent years the market grew at a rate of almost 30% annually. We expect this rate to reduce but still estimate 18% growth over the next years annually.

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Toyota took the lead in the new cars market, whereas the most popular models sold are the Dacia Logan and the Opel Astra. Most brands are represented by a wide dealership network, mostly owned by one local company. For many brands there is room for growing the dealer network.

The majority of new cars purchased are financed through financial leasing arrangements. Loans play a minor role in new car purchase and a somewhat bigger role in the used car market.

Currently, no OEM is manufacturing in Bulgaria. Bulgaria traditionally did not play any role in car production, although Rover did assemble cars on the basis of CDK kits for some years and a local industrial conglomerate is currently considering the production of a new local brand. This is in line with Bulgaria trying to attract FDI, also in the automotive sector. With no cars manufactured, there are only few players in the parts industry in Bulgaria.

The Bulgarian aftermarket is strongly influenced by the huge number of second-hand imported cars. These cars need service – and the service network in Bulgaria currently is not sufficiently organized to provide this service. Most Bulgarians are price sensitive and hence choose IAM parts or fakes. Fakes are an issue, especially for maintenance and minor repairs. Also, used and somehow refurbished parts are an issue.

Alongside with the car parc, the Bulgarian aftermarket (spare parts) will be growing at a rate of 3,5% until 2010, outperforming the growth of the car parc. The distribution system for spare parts to the consumer is still developing, alongside with the system for car service.

In total, the Bulgarian market for passenger cars and spare parts is quite attractive. The new car market will continue to grow and the aftermarket will become more professional in the course of the next years. The main challenge will be to provide attractive financing conditions for Bulgarians with low income. In the aftermarket, distribution of spare parts is the main issue to resolve.

To prepare this market report, we used primary and secondary research methods: expert interviews and consumer surveys – in particular for the market of automotive parts, which is not covered yet by any substantial statistical data – and standard analysis of secondary information available on the topic. Based on our experience and developed competencies we have built proprietary market models to forecast future market development. The report was compiled in the period from October 2007 to January 2008 and hence includes statistical data until December 2007, if available.

For a table of content and a list of figures and tables, please see details below.

The automotive-country-report on Bulgaria 2008 is available free of charge as a download. If you are interested in more recent data and information on the Bulgarian automotive market, please contact us at +49 (0)30 4005 4914 or at request@globis-consulting.com.

Country-Report-Automotive-Bulgaria

Globis is a Germany-based consulting company with broad international coverage regarding strategy development, especially entry strategies into new markets.

TABLE OF CONTENTS

LIST OF FIGURES 4
LIST OF TABLES 5
1 SUMMARY 6
2 COUNTRY BASICS 9
2.1 Economic Development 11
2.2 Regional Economic Development 14
2.3 Bulgaria and the European Union 16
3 BULGARIAN PASSENGER CAR MARKET 18
3.1 Bulgarian Car Parc 18
3.1.1 Structure of Car Parc by Age 20
3.1.2 Structure of Car Parc by Brands and Models 21
3.1.3 Car Parc in Regional Markets 23
3.2 Passenger Car Sales and Imports 27
3.2.1 Size of Market 27
3.2.2 Market Characteristics New Cars Market 30
3.2.3 Market Characteristics Used Cars Market 34
3.2.4 Sales Drivers for New Car Market 35
3.2.4.1 Increasing Income 35
3.2.4.2 Used Car Imports 36
3.2.4.3 Car Loans 37
3.2.4.4 Dealership Networks / Distribution Systems 39
3.2.4.5 Consumer preferences 45
4 BULGARIAN COMPONENTS AND AFTERMARKET 47
4.1 Bulgarian Automotive Industry 47
4.2 Bulgarian Aftermarket 52
4.2.1 Market Segments Aftermarket (OE, IAM, Fakes) 52
4.2.2 Market Size Aftermarket 53
4.3 Distribution System / Sales Channels for Spare Parts 56
4.3.1 Parts Importers and Distributors 59
4.3.2 Spare Part Shops 61
4.3.3 Service Stations 61
5 OPPORTUNITIES AND RISK 64
6 APPENDICES 66
6.1 Districts and Regions in Bulgaria 66
6.2 Major Bulgarian Cities 68
6.3 New Car Sales by Brand, 2003-2007 70
6.4 Bulgarian Import Regulations for Cars 73
6.4.1 Imports from EU-countries 73
6.4.2 Imports from Non-EU-countries 73
6.5 New Car Sales by Model, 2006-2007 75
6.6 Major Importers of Used Cars 84
7 ABBREVIATIONS 88

List of Figures

Figure 1: Bulgarian Borders, Districts and Main Cities 10
Figure 2: GDP Growth Rates at Constant Prices, 2002-2010 11
Figure 3: Development of GDP per Capita at Current Prices, in EUR, 2002-2010 12
Figure 4: Development of Average Monthly Income, in EUR, 2002-2010 14
Figure 5: Development of Car Parc, in Mio. Units, 1992-2010 18
Figure 6: Car Penetration in Bulgaria and Selected European Countries, 2006/2007 20
Figure 7: Structure of Bulgarian Car Parc by Age, 2007 21
Figure 8: Structure of Bulgarian Car Parc by Brand, 2007 22
Figure 9: Car Parc in Plovdiv by Age, 2007 24
Figure 10: Car Penetration in Bulgarian Regions, 2007 26
Figure 10: Development of Used Car Imports, in 1.000, 2002-2010 27
Figure 11: Development of New Car Sales, in 1.000, 2002-2010 28
Figure 12: Relative Structure of New and Used Car Additions to the Parc, 2002-2010 29
Figure 13: Car Sales by Segment, 2007 33
Figure 14: Share of Leasing Contracts in Total New Car Sales, 2004-2007 37
Figure 15: Market Share by Type of Financing for New and Used Cars, 2007 39
Figure 16: Key Criteria Influencing Car Choice in Bulgaria, Single-Choice, 2006/2007 45
Figure 17: Share of OE-, IAM-, Fake-, Used-Parts for Routine Service, 2007 52
Figure 18: Size of Bulgarian Aftermarket, EUR bn., 2007-2010 55
Figure 19: Bulgarian Aftermarket for Important Spare Parts, EUR mio., 2007-2010 56
Figure 20: Distribution System for Spare Parts in Bulgaria 57
Figure 21: Shares of Spare Part Sales Channels for Non-OE, 2007 58
Figure 22: Share of Service-Channels Used for Car Repair and Maintenance, 2007 63

List of Tables

Table 1: Bulgaria – Country Facts, 2007 9
Table 2: Population Development in Planning Regions, 2005-2006 10
Table 3: Regional Population Density and GDP per Capita at Current Prices, 2005/2006 15
Table 4: Comparison of Key Figures EU / Bulgaria, 2006 17
Table 5: Popular Models in Bulgaria’s Car Park, 2007 23
Table 6: Regional Car Parks by Number of Vehicles and Penetration, 2007 26
Table 7: New and Used Car Additions to the Park, in Units, 2002-2010 30
Table 8: Top-Selling Brands in New Car Market, 2005-2007 31
Table 9:Top-Selling Models in New Car Market, 2006-2007 32
Table 10: Leasing Companies Affiliated to Car Dealers, 2007 38
Table 11: Major Bulgarian Automobile Dealer Companies, 2007 41
Table 12: Number of Dealer Outlets by Brand and Region in Bulgaria, 2007 44
Table 13: Bulgarian-Owned Automotive Components or Parts Producers, 2007 50
Table 14: Foreign Automotive Components or Parts Producers in Bulgaria, 2007 51
Table 15: New Automotive Production Projects in Bulgaria, 2007 51
Table 16: Length and Quality of Bulgarian Roads, 2006 54
Table 17: Largest Spare Parts Importers in Bulgaria, 2007 60
Table 18: Large Chains of Multi-Brand Service Centers in Bulgaria, 2007 62
Table 19: Excise Duty on Used Cars Imported into Bulgaria (from EU and non-EU), 2007 73