Coface has highlighted a significant potential risk for thousands of companies in Bulgaria, rooted in the shifting dynamics of the automotive sector across Central and Eastern Europe (CEE). Although initial signs seemed optimistic, a deeper analysis reveals that the environment has become more complex and financially unstable.

The automotive sector in CEE has grown to be a major hub for production and investment, yet it faces mounting economic, geopolitical and sector-specific challenges. Rising costs, weakening demand in end markets, supply chain bottlenecks, and the constant threat of trade tariffs are exerting heavy pressure on manufacturers, suppliers and financiers alike, with credit and liquidity concerns becoming increasingly prominent.

According to the most recent data from the Bulgarian Commercial Register, 558 companies are officially listed under “Manufacture of vehicles, engines and parts for use in the automotive industry.” While this figure may appear modest, it captures only a portion of Bulgaria’s involvement in the sector. Thousands more firms operate in closely tied or complementary areas that depend on the health of the main automotive market and are thus vulnerable to its growing instability.

For Bulgaria, these trends signal a worrying drop in orders, leading to a likely decline in production and exports of Bulgarian-made products within the European automotive sector. The latest figures from the National Statistical Institute reveal that Bulgaria’s industrial production index fell by 8.3% year-on-year after three successive monthly declines since December 2024, which were -3.9%, -3.3% and -3.5% respectively. The manufacturing sector itself pulled the index down by 3.3%, but it was the energy sector’s staggering 30% annual decline that drove the overall contraction. On a month-to-month basis, March 2025 saw production shrink by 3.6%, steeper than February’s 0.5% decline.

Plamen Dimitrov, Coface’s Country Manager for Bulgaria, pointed out that there is little prospect of stabilization in the European automotive sector in the near term. A mix of challenges looms large: the push for a green transition, pressure to adopt electric vehicles, competition from cheaper Chinese imports, Europe’s lagging competitiveness, and the trade war that could bring about US tariffs.

Even as some of the numbers for the CEE automotive industry may appear encouraging, a closer inspection reveals a troubling picture of increasing costs, thinning margins and rising corporate debt. If not addressed proactively, these pressures risk turning into broader financial problems, affecting even companies previously considered stable.

The volatility surrounding trade and tariffs compounds these difficulties. The automotive sector in CEE is deeply tied to the EU and global markets. In 2024 alone, Poland exported automotive goods worth USD 35 billion, accounting for 11% of its total exports. Romania’s automotive sector, meanwhile, represents 35% of the country’s exports.

In Bulgaria, the automotive ecosystem is broad and interconnected. There are close to 10,000 companies in the wholesale trade of automotive parts and over 9,000 firms involved in the sale of new and used vehicles. Key players like Monbat and El Bat drive the “Manufacture of batteries and car accumulators” sector, while hundreds of other Bulgarian companies work in areas such as tire manufacturing and repair, electric motors and generator production, and the making of aluminum and other light metals.

The threat of US tariffs hangs over this ecosystem, raising concerns about sudden shocks in demand. Though Bulgaria’s direct automotive exports to the US are small, the indirect risks from disruptions in the global supply chain could be substantial.

For manufacturers of automotive components, already operating on slim margins below 10%, even minor order delays could quickly evolve into liquidity problems, particularly for smaller and weaker players. According to Coface data, the number of insolvencies among automotive suppliers in CEE rose by 15% in the first half of 2024, reflecting the growing strain.

While passenger car registrations in core Eurozone markets are expected to surpass 140 index points by the end of 2024, the recovery in CEE countries remains more modest. In absolute terms, it lags behind Western Europe and is still driven primarily by internal combustion engine models, which account for 74% of the market.

In the end, the picture for the automotive industry in Central and Eastern Europe is marked by rising costs, trade uncertainties and fast-evolving consumer preferences. In this climate, proactive risk management is not simply a recommended practice – it’s a critical measure to ensure the survival and competitiveness of companies in Bulgaria and across the region.