Bulgaria: East Meets West and the Ideal Nearshoring Destination

Arch. Lyubomir Stanislavov graduated UASG in Sofia in 2001 with a degree in Architecture. He acquired additional qualifications at the University de Valladolid, Spain, and the Technical University of Graz, Austria. In 2001 he began his professional development as a lecturer in the Department of Theory and History of Architecture. He is the author of significant projects in Bulgaria and abroad, including the reconstruction of the National Palace of Culture, numerous industrial and emblematic public buildings. In parallel, until 2015 he worked in the publishing industry as a partner to some of the world's largest publishers such as BBC Worldwide, CondeNast, Hola!, Axel Springer, Economist, De Agostini and Haymarket Media Group. In 2012 he was one of the founders of Automotive Cluster Bulgaria, and since 2015 he has been its CEO. In this role, he has been involved in attracting world-famous automotive companies to Bulgaria, including the Bosch Engineering Center in Sofia. One of his most recent roles has been related to the development and strengthening of high added value industrial sectors related to innovative technologies in various fields, as Executive Director and BRAIT (Bulgarian Employers Association of Innovative Technologies).

Since the beginning of the COVID-19 pandemic, there have been talks on the possibility of Bulgaria becoming the new nearshoring destination to relocate production and shorten supply chains. Are you already seeing such a trend and what are your expectations for 2022?

The automotive industry in times of crisis is an island of stability for the Bulgarian economy and those working in the sector. At the beginning of the pandemic, companies experienced a real shock and laid off workers because of the expected drop in orders. New car sales collapsed by over 80% in the second quarter of 2020 globally. Of course, there were some specific disruptions and even supply chain disruptions related to COVID-19 that led to inflation. However, most of the inflation was due to rising energy and transport costs. A gradual recovery followed, however, and in September of that year many more people were hired than had been laid off earlier. Many of the major car companies in Bulgaria have experienced probably the best months in their history. Supply chains have become overloaded. And this has had an impact on the nearshoring effect, which is the return of production to countries geographically closer to the customer. In addition, projects postponed because of the pandemic are now restarting. 

The trend that is being noticed is that components and items previously ordered in China have started being ordered at closer destinations and the price is fully comparable to China. Our industry is taking advantage of this situation.

Container freight rates, for example, were more than five times higher in September 2021 than in September 2020. Overall levels of congestion at the ports were complicating matters even further.

The crisis is actually having a positive impact on the industry in Bulgaria, as large companies are enjoying more orders thanks to this trend. Of course, this is not valid for all companies. There are also those that are experiencing difficulties because of the crisis. So there is no definitive answer. Overall, the industry is doing very well, but there are exceptions.

Leading automotive manufacturers and suppliers view Bulgaria as a potential destination for their operations. Do we have what it takes to meet their expectations?

In 2022, we expect growth in foreign investment in the automotive sector in the country. In addition to the launch of the Next e.Go project in Lovech, which will be one of the most advanced not only for Bulgaria, but also for Europe, a number of other investments by established automotive parts manufacturers are also being discussed. One of the companies we are in talks with has investment intentions of over EUR 100 million.

We have a whole list of potential new investors in Bulgaria, and I think it is not impossible that within this year the investments coming from Automotive Cluster Bulgaria will exceed 1 billion euros.

I think we have everything we need to meet investors' expectations - there are enough regions in Bulgaria that offer the right conditions. For example, in Lovech, on the territory of the e.Go plant, there will be more than 1,100 acres of free area for an industrial zone for suppliers of components for both e.GO and other automotive manufacturers.

We are proactive, and we need bolder financial assistance policies to stimulate investment in production, stability and predictability for production planning, and shortened timeframes for problem resolution and administration approvals. Active policies for closer cooperation between education and business to provide personnel.

As an organization that aims to support and assist the development of the automotive business in Bulgaria, what are the main strategies you are implementing to promote Bulgaria as a promising nearshoring destination?

Automotive Cluster Bulgaria unites many of the more than 230 car manufacturers in the country. The industry has imperceptibly become the fastest growing in the country and provides the highest added value in relation to the number of employees. This inevitably brings many challenges, but perhaps the biggest for us as a cluster and for the country is to continue to attract automotive companies and to turn Bulgaria into an increasingly sought-after partner for the creation of new industries.

Many of the strategies we are implementing involve presenting Bulgaria as the most suitable destination in the region. Our country's advantages include: geostrategic location, good financial parameters in the EU, low taxes, educated and skilled workforce.