Boston, MA -- (SBWIRE) -- 12/31/2013 -- Passenger car sales in Bulgaria declined 1.1% year-on-year (y-o-y) in the first 10 months of 2013, to 15,585 units (although this figure may be subject to an upward or downward revision due to the unreliability of the statistics). In 2013, we estimate private consumption to have remained weak on the back of prolonged political uncertainty exacerbating existing dynamics in the labour market (see 'Political Instability To Weigh On Growth', October 9). Our bearish outlook for consumer sentiment has informed our forecast for a 3.5% drop in passenger car sales in 2013. In 2014, we forecast a 4.5% decline in passenger car sales as consumer weakness continues to weigh on the segment.

Passenger car sales in Bulgaria have declined considerably from their 2008 levels, when sales hit some 43,000 units. Sales in this segment have remained relatively weak since then, and we do not see the market reaching these levels again over our forecast period to 2017.

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On the plus side, Bulgaria has emerged as one of the preferred destinations for parts suppliers looking to increase their presence in the region, although the economic crisis has hit profits and prompted suppliers to reduce their operational capacities. Declining vehicle output in the key markets of Germany and Italy has put a crimp on demand for Bulgarian parts, but BMI believes that the long-term prospects are good, supported by the country's competitive advantages in cost, taxation and location.

The Bulgarian government is seeking more investments in the country's auto industry following its success in winning a new vehicle plant for Chinese carmaker Great Wall Motors in 2012. The government has been attracting new investments from suppliers owing to low corporate and personal taxation, a skilled workforce and a stable economic climate. Great Wall's factory in Lovech, which has an annual manufacturing capacity of 50,000 units, produces Steed pick-up trucks from kits supplied from China.

In November 2013 US-based battery manufacturer Trojan Battery selected Start Trading as its prime distributor and service provider throughout Bulgaria. Start Trading will provide Trojan's total line of deep-cycle flooded, AGM and gel batteries with an extensive inventory holding to ensure quick deliveries. In December 2012, Chinese auto manufacturer Build Your Dreams (BYD) and Bulgarian manufacturer Bulmineral announced that they are to jointly construct an auto assembly plant in Sofia to produce electric cars and electric buses. BMI believes that the European electric vehicle (EV) market is set to receive considerable investment from international auto manufacturers over the medium term on the back of increasing sales and government incentives for sale and production. Further, we believe that Bulgaria may attract further investment from auto manufacturers on the back of ongoing investments in the region as companies continue to pivot from Western Europe.

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