13:06 07.02.2013

New car market in Ukraine not to reach pre-crisis level for next 10-15 years, say experts

4 min read

Today the Ukrainian automobile market (new passenger cars and commercial vehicles) with 232,000 vehicles sold in 2012 is appropriate for the state of the economy as a whole and it might rapidly change pace (both upward and downward) only if the conditions on the market change significantly, according to experts of the sector.

"Today we have a fair market volume, so it will not fall or grow until certain drivers appear. The car is not an article of daily necessity, and if, god grant, GDP rises by 2-3.5% per year, the automobile market will grow too. This year we expect that its volume will not be more than 232,000, and we even project a slight fall for ourselves – to 225,000," Vice President of ViDi Group, Artem Tkachenko, said at a roundtable devoted to the problems of stimulation of car sales.

He said that Ukraine would not have the market as it had in the pre-crisis 2008 (over 660,000) for the next 10 or 15 years.

"In Russia, the car market has managed to return to pre-crisis levels, as the Russian policy aimed at its stimulation was effective [including bonuses for replacement of oil cars to new ones]. Ukraine does not have any policy in this direction," Tkachenko said.

Director General of the All-Ukrainian Association of Car Importers and Dealers (VAAID), Oleh Nazarenko, said that with the introduction of a new tax, which could be a vehicle recycling tax, and the special duty, the market could narrow by 50-60%.

"If new taxes are introduced, with the financial capacity of the market unchanged [around $5 billion] the price of cars could grow by 10% or 20% or 30%... In the said conditions, one could leave the market, the shadow business, which today has the minimum share, will increase, and then the market could fall by 50-60%," he said.

The experts said that in the said conditions an enlargement of automobile holdings would be seen.

Nazarenko added that even with the retaining of today's rules on the market, there are no preconditions for its growth.

"The forecast will mainly depend on how quickly a stable hryvnia exchange rate is set [it's no secret that today the hryvnia is overvalued], and then let's hope that the market retains at the same level or grows by 2-3%," Nazarenko said.

Representatives of Ukrainian commercial banks who were present at the roundtable agreed that this year the share of car sales on credit will remain at the level of 12012 – around 20%, but the share of leasing could expand (for companies) to 6-6.5% compared to 5% in 2012.

The head of the car crediting direction at Astra Bank, Vitaliy Zhykhartsev, said that there are some preconditions for reducing credit rates.

"While last year banks had to increase deposit rates to maintain the hryvnia [and credit rates], now people see that after the election nothing changed, there is no panic… and credit rates could fall by 1-2%," he said, adding that the first quarter will see an upward pace of crediting.

The head of the alternative sales channel department at public joint-stock company Bank of Cyprus, Volodymyr Radko, said that banks are interested in crediting the purchase of old cars, as the capacity of the old car market is double that of the new car market.

"Of course, this crediting brings more risks for banks and it is more expensive, but we'll try to develop the direction," he said.

Zhykhartsev said that this market is very complicated due to its non-transparency, so it would be better to move it to car dealer centers, and today some dealers have such cars in their centers.

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