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Driving change in Stara Zagora

The Bulgarian city is positioning itself at the forefront of the region’s electric vehicle push

October 14, 2024

7 min read

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October 14, 2024

By

7 min read

Stara Zagora’s emergence as a leader in the automotive industry is no accident. Its geographic location in the heart of Bulgaria provides unmatched connectivity to major economic centers across the country and beyond. The region’s access to four major European transport corridors ensures seamless logistics, which is a key competitive advantage in an industry where speed and efficiency of supply chains are critical.

“Yes, Stara Zagora’s location is a significant factor in our success,” says Rositsa Raykova, head of the investment department at the municipality of Stara Zagora. “Being centrally located, with proximity to major airports and seaports, allows us to serve both European and global markets effectively, making it an attractive hub for automotive companies looking to expand their footprint.”

A forthcoming report from PwC looking at trade and investment in Stara Zagora supports the claims. “[The increased interest of investors in this value chain in CEE indicates that Stara Zagora’s location] makes it an attractive destination with potential primarily for tier one, two, three suppliers due to the proximity to Original Equipment Manufacturers (OEMs) and tier one suppliers in Central and Western Europe, as well as streamlined supply of raw materials. Our analysis indicates high potential in attracting these suppliers and medium potential for OEMs, specifically in the EV value chain.”

Jennifer Coulter-Lissman is the CEO of NTG Supply Chain Solutions, a global provider of logistics solutions for international organisations.

She says that the trend toward localised, flexible supply chains is reshaping the automotive industry, offering benefits like reduced transportation costs, improved agility, and lower emissions.

“However, implementation takes time and significant investment,” she adds. “Regions offering skilled workers, infrastructure, and a network of suppliers will be well-positioned to lead in the future automotive industry. Adapting to rapidly changing market conditions, from EV adoption rates to consumer affordability concerns, will be crucial for success.”

In recent years, global firms such as Akwel of France and Nedschroef of the Netherlands have opened manufacturing centres in Stara Zagora. Both companies chose Stara Zagora due to its strategic location, well-developed infrastructure, commitment to innovation, and skilled labour force.

“Stara Zagora and the region offer well-prepared workers for the needs of businesses,” says Nedschroef’s Gergana Mandevska.

Now the region wants to attract more investors. It appears well equipped to do so.

“Stara Zagora shows a growing capacity to attract manufacturing investments that build on the region’s industrial traditions, qualified and experienced workforce, strategic location and strong committed support by public authorities,” adds the PwC report.

Costs in the Stara Zagora district are also competitive. Velizar Dimitrov is CTO of eDynamix, a firm which helps automotive retailers and OEMs digitise customer journeys, says that the cost running an office in a town like Stara Zagora is a lot more favourable compared to Sofia, Plovdiv, or other bigger towns.

“Even though it wouldn’t be a problem for the company now, back in 2011 when we were just getting started, it was part of the decision [to invest here],” he says.

Infrastructure for a growing industry

Beyond its strategic location, Stara Zagora’s commitment to developing world-class infrastructure has been a major draw for automotive companies.

The district boasts several industrial zones, including Zagore and Elenino, where firms benefit from a stable electricity grid, comprehensive gas distribution, and advanced digital infrastructure.

“With the rise of electric vehicles, our infrastructure development is focused on supporting the transition to green technologies,” explains Raykova. “We are expanding our network of EV charging stations and integrating smart grid technologies to meet the growing demand for electric mobility. This is crucial not only for our production but for attracting new players to the region.”

Regions that want to position themselves as a leader in the automotive industry, especially in terms of Product Carbon Footprint (PCF) compliance, must implement strong regulatory frameworks and build an ecosystem that promotes sustainable practices, argues TJ Yoon, managing director, EU and global product carbon footprint lead at Glassdome, an industrial software company dedicated to making operations and sustainability clear and simple for manufacturers.

“This entails creating a skilled talent pool, providing financial incentives, and establishing data-sharing platforms to facilitate transparent reporting,” he says.

“The main challenge for such regions is to balance compliance and innovation while supporting local suppliers that may struggle to meet new standards. Additionally, regions must ensure that investments in sustainability don’t become a burden for smaller suppliers, creating an uneven playing field within the supply chain.”

Proactive governance

Local governance plays an instrumental role in Stara Zagora’s success. The district offers a wide array of incentives to attract investment, including some of the lowest land lease rates in Bulgaria, reduced local taxes, and financial support for vocational training and social security costs.

“Our corporate tax rate is a flat 10 per cent, one of the lowest in Europe, and our local taxes and fees the lowest in Bulgaria and in Europe too,” says Raykova. “This not only makes Stara Zagora an affordable place to do business but one that offers exceptional value for money, especially for companies in the automotive sector looking to maximise their investments.”

According to recent statistics, the automotive industry accounts for a substantial portion of Stara Zagora’s industrial output, with investment levels reaching new highs in 2023, further solidifying the region’s position.

“The local government is committed to simplifying administrative procedures, making it easier for businesses to set up and operate in the region,” says PwC trade and investment report. “In addition, there is availability of subsidies and other incentives, relative to the size of the investment.”

Velizar Dimitrov of eDynamix meanwhile points out that the authorities are always willing to listen to the needs and concerns of businesses.

“Businesses are always involved in discussions and decision making, ensuring the relevance of the outcome,” he says, adding, “the municipality is supportive of potential investors and is eager to ensure the town progresses in the right direction.”

Nedschroef’s Gergana Mandevska highlights the “supportive and helpful” investment department run by Raykova.

A skilled workforce for the future of automotive

Stara Zagora’s success isn’t just built on infrastructure and incentives—its workforce is one of the key pillars driving growth. The region has recognised that maintaining its leadership in the automotive industry requires a skilled workforce that can adapt to the sector’s evolving needs, particularly as it transitions towards electric vehicles and sustainable technologies.

In collaboration with local educational institutions, currently there are specialised engineering and technical education programmes to meet the demands of the automotive sector.

“We have placed a strong emphasis on training in EV technology, ensuring that our workforce is prepared for the future,” says Rositsa Raykova. “We are also actively supporting workers transitioning from traditional energy sectors into roles within the EV and green technology industries.”

“A few years back the municipality made IT a priority in schools, as well as the local Trakia University. It was a massive step forward,” says Dimitrov.

Foreign languages are also crucial. “A lot of the population speaks foreign languages which is a serious advantage for foreign firms,” adds Mandevska.

“Developing a full-fledged value chain, based on the district’s competitive advantages, will strengthen the district’s automotive sector, improve Stara Zagora’s recognition and attractiveness to key global players, and position the region as a key investment destination for automotive and mobility investors,” says the PwC report.

This focus on workforce development is pivotal as the global automotive industry shifts gears. Stara Zagora is not only ensuring that its current workforce is ready for the future but is also creating opportunities for future generations to thrive in this rapidly changing sector.

“Continuous efforts in workforce development and training programmes ensure that the labour force remains competitive and well-equipped to handle the technological demands of modern automotive market developments, such as EV production,” the report reads.

PwC has identified Germany, Italy, Turkey, the US, and Romania as nations showing a keen interest in investing in the CEE automotive sector, and potential future investors in Stara Zagora.

“By continuing to develop a stable automotive and mobility value chain, specifically in EV components production, and by further enhancing public support systems and lowering the administrative burden, Stara Zagora can significantly increase its attractiveness to key strategic investors and global players,” PwC’s report concludes.

This content was produced in collaboration with the municipality of Stara Zagora and the European Commission’s Directorate General for Structural Reform Support.

Marek Grzegorczyk

Marek Grzegorczyk

Marek Grzegorczyk is an analyst at Reinvantage.

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