With German carmaker Volkswagen postponing a final decision on building a new plant in Turkey, Bulgaria and Romania once again see a chance to win back the deal. But it’s likely to be a bumpy road ahead.
Volkswagen has put plans for a €1.4 billion ($1.56 billion) car factory in Turkey on ice because of the Turkish military offensive in Syria. And now Bulgaria and Romania are hoping to win the contract. Especially Bulgaria, which originally competed with Turkey, Serbia and Romania for the mega investment, is pulling out all the stops to get back into the game and win the deal.
Former Bulgarian President Rosen Plevneliev, honorary chairman of the powerful Automotive Cluster Bulgaria network, announced that Sofia has increased its initial proposal and “found a way to offer Volkswagen between €250 and €260 million instead of the original €135 million.” Plevneliev said his country had already fundamentally made the offer and is now waiting for an answer from VW.
Take into account the infrastructure, rail links and highways in Elin Pelin near Sofia, where the proposed site is for a future plant, and the offer is quite generous as the total amount rises to a whopping €800 million.
A big lever
As tempting as it may seem, the new offer does not automatically mean that VW will now return to its “second option” of Bulgaria. The advantages of Bulgaria are low taxes and EU membership.
The latter, however, is precisely the reason why the country can’t grant the carmaker direct state subsidies. Sources in Sofia admitted that “the German company most likely never hesitated to invest in Turkey, and only used Sofia as a lever for a better deal with Erdogan.”
Plevneliev also announced that Bulgaria would file a complaint with the European Commission since VW and Turkey did not comply with EU competition rules.
But Romania also sees a chance to win the contract for the investment. The city of Arad on the country’s western border with Hungary and Serbia would be the ideal location for the new VW plant from a Romanian point of view. Good connections to Western Europe and cheap labor — even from neighboring countries — would be clear advantages, according to Bucharest.
Stefan-Radu Oprea, Romania’s minister of trade and business environment, confirmed that the government in Bucharest had resumed discussions with Volkswagen in order to bring the factory to Romania.
A fair fight
Gheorghe Falca, a member of the National Liberal Party (PNL) and former mayor of Arad, welcomed the reported resumption of negotiations with VW.
“The location in Arad already met the conditions in the first round of negotiations, and the city has provided around 1,100 hectares for both the plant and its suppliers,” Falca told Romanian news agency Mediafax, adding that a fast rail link, motorway and airport as well as numerous suppliers already based in the region would guarantee “extremely favorable production costs.”
This is not Romania’s first encounter with Volkswagen. Back in the late 1960s, the story made the rounds that VW was interested in a plant in the then Communist Romania. However, the then dictator Nicolae Ceausescu neither accepted the group’s preferred location in central Transylvania, nor did he accept a quota for workers from the German minority living in the country. In the end the contract for a car factory went to Renault, the French parent company of today’s Dacia.
Both Bucharest and Sofia have announced their strict adherence to the European Union’s requirements. The subsidies offered will not violate the rules of the common market. So far Volkswagen has not yet commented on the new advances from Bulgaria and Romania.