Cooperation with Great Wall good chance for Bulgarian automobile industry

Bulgaria's Litex Motors Company has recently signed a deal with China's Great Wall automobile company on building a car-making plant in Bulgaria in a move seen as a good opportunity for Bulgaria to boost its automobile industry.

Under the deal, Great Wall, one of the biggest automakers in China, will build a factory in Lovech, where the production of SUVs is expected to start by the end of 2010, with an investment of nearly 80 million euros (about $119 million).

Great Wall produces SUVs, MPVs and pick-up trucks and has more than 20 subsidiaries with over 18,000 employees.

The deal is seen as a big chance for Bulgaria to prove that the business climate in the country is appropriate for large investments. But it also may become the last chance for Bulgarian automobile industry after the failure of cooperation with Rover in1996.

In the middle of the 1990s, with the production of Rover Maestro and Rover Montego going down in the factory in Cowley Oxford, Britain, Rover's managers were planning to move the production outside the country.

The destination was Bulgaria. The chosen town of Varna is perfect because it has an outlet on the sea, which provides easy access to imported car parts from England.

The factory, with an investment of nearly 20 million dollars, was expected to produce 10,000 automobiles a year. It was 51 percent owned by the Rover Group and 49 percent by the Daru Group, a Bulgarian company. The plant opened in 1995.

However, Bulgarian-made Rover Maestro proved to be a market failure. The combination of weaknesses in the marketing strategy, uncompetitive prices and the presence of a strong competitor - Skoda Felicia -- were fatal for the hatchback.

At that time Skoda was already owned by German carmaker Volkswagen AG and it imported cars with only 50 percent customs duty, while the Bulgarian government refused to lower the customs duty on English auto parts, although they were for the factory in Varna.

The government also canceled the order of English cars, which would be a strong push for the image of the company.

Production at the Varna plant stopped on April 4, 1996, after 2,200 cars were produced.

Bulgaria is now facing a challenge -- the country needs to prove that lessons were drawn from past mistakes.

Car manufacturing can help revive the Bulgarian economy if the government and local entrepreneurs are ready to stand behind their promise.

The deal with the Great Wall company is very important for the Bulgarian economy and it may bring the country back to the list of modern automobile manufacturers. If it fails, that could be another major setback for Bulgaria's own car industry.