The streets of Kyiv and other Ukrainian cities are becoming ever more crowded by the arrival of thousands of new cars each month. April broke all records for the number of new cars sold in the country, suggesting that economic woes have yet to deal consumer confidence any telling blows. In general the first quarter of this year was very successful for automobile dealers and traders across the country. Distributors of Russian VAZ and South Korean Daewoo cars gained the most, though the situation could radically alter following Ukraine’s accession to the WTO on May 16.
In April this year more than 61,000 cars were sold in Ukraine, and during the first four months sales volume grew by 61% compared with the same period of 2007, Auto-Consulting, an industry analysis company announced last week. Russia’s AVTOVAZ is still the most popular vehicle with Ukrainian consumers, though this popularity is gradually being eroded. In March the company garnered 18% of sales, and in April this figure was down to 17%. Ivan Fedoryshchenko, the director of sales at Formula Motor Ukraine, an official SEAT distributor in Ukraine, adds that AVTOVAZ’s share has dropped by 6-7% over the course of the last year.
Which brands are Ukrainians buying?
Daewoo cars, found everywhere on the streets of Kyiv, took second place by sales volume, but the company still struggles to hold 10% of the market. Chevrolet lost 1% but remained in third place. Industry analysts emphasised the recent success of Hyundai, which boasts nearly 7% of the market, though the company has not yet begun manufacturing at its new plant in Cherkasy and has not started retail sales of two new models. Japanese giant Mitsubishi occupies the fifth place. According to Auto-Consulting, other popular car brands for sale included Chery, Toyota and Skoda. In the prestige niche of luxury cars Ukrainians still prefer the Lexus brand and the ever-popular Mercedes Benz.
Bucking a European trend
Ukraine is experiencing a boom on the automobile market at a time when Europe is seeing a fall of demand for cars. According to April figures from the European Automobile Manufacturers Association, new passenger car registrations fell by 9.5% in March, bringing the quarterly figure down to -1.7% compared with registrations in the first three months of last year. The reason cited for this drop is the US economic crisis. In Ukraine the first quarter of 2008 demonstrated growth of car sales of 70%, despite a slew of crises.
Fedoryshenko states that this growth will continue. “It is early to compare us with western Europe because the number of cars per 1,000 people in Ukraine is three times less at least than in that part of Europe. So we have space for growth for the next few years,” he explains. “Also, a considerable number of car parks are filled with old Russian and Ukrainian cars and these are being actively replaced with new ones. These old cars don’t meet modern consumer demands and so we have to change. Average salaries are growing and people want to use more comfortable and safer cars,” he adds.
The UkrAVTO Corporation, Ukraine’s largest automobile manufacturer, explains the quick growth of sales with economic points such as the growth of consumer spending power, improvements in credit programmes and inflation expectations. “A car is a kind of investment for the consumer,” states Maryna Hrushevska, the head of the company’s press service.
WTO membership and car sales
Market insiders are not ready to forecast how the situation will change thanks to Ukraine’s WTO accession. On May 16, when the country officially became a part of the world trade organisation, its car manufacturers lost governmental protection in the form of a 25% tax on imported cars. “Of course, there will be changes on the market but unfortunately this question remains difficult to forecast,” says Ms. Hrushevska. “We still have more questions than answers,” agrees Mr. Fedoryshchenko. He says that prices are unlikely to change radically, “because the producers will probably raise their prices for us dealers,” but adds that the state budget will introduce new duties to cover any losses resulting from the abolishment of import taxes.
A wider selection of cars on offer
At present cars produced by local and Russian manufacturers remain popular with the public. Their price advantage over foreign brands is augmented, Ms. Hrushevska adds, by the fact that these cars are always in stock and there are easy terms available for buying them on credit. This situation could soon change. “If Russian cars face the same customs duty as the rest (the duty is currently zero), of course, people will grow more interested in other foreign cars,” says Mr. Fedoryshchenko.
