The prices of imported cars after the cancellation of a 13% markup on import duty (as of September 7, 2009) could have fallen by 10-15% if the forex rate of the hryvnia against the U.S. dollar had remained at the level registered May through June, but amid the slump in the value of the hryvnia, car importers will try to keep the prices at the current level, say representatives of Ukrainian car importers.
"After the cancellation of the markup and with a stable hryvnia, the prices could have fallen by 10-15%, but under the current situation prices for some makes could slid by [only] 5-7%, and even grow for some. However, we'll try to keep the price at the current level," Olena Dunina, the head of AutoInternational company (the import of Mazda, Suzuki), said at a press conference on Monday.
But car importers also said that an initiative put forth by MPs to introduce an additional car duty (as of January 1, 2010), of 10-15% could trigger an increase in prices of cars by up to 20%.
Dunina said that the introduction of the additional markup on the import duty in March did not in fact result in a redistribution of the market, the decline in sales of both imported and locally produced cars was practically the same, and the ratio of imported cars to those made in Ukraine remains at almost 40% to 60%.
At the same time, Oleksandr Timofeyev, the head of AWT Bavaria, said that in connection with a considerable decrease in sales, the amount of car services declined by about 30%, which in turn resulted in a reduction in the number of employees at dealers' enterprises.
Dunina also said that after the cancellation of the markup, from 10,000 to 15,000 imported cars per month are expected to undergo customs clearance, which will boost payments to the budget, whereas from May to August 2009 about 2,000 cars per month underwent customs clearance.
"Today 90,000 cars are at warehouses both in Ukraine and European countries," said Oleh Nazarenko, the director general of the All-Ukrainian Association of Car Importers and Dealers.
However, Nazarenko says that the introduction of an additional car duty is a new attempt to artificially curb the sales of imported cars.
"The introduction of a new car duty whose rate could hit 15% – there are two draft laws with 10% and 15% duty – is the next step in exerting tax pressure on our citizens, and is a scheme based on corruption, because the subsidizing algorithm is not clear, and could become similar to that of VAT refunding," he said.
Moreover, he said, the introduction of such a duty could revive a number of illegal import schemes, and may be conducive to gray imports.
"One should not forget that Russian-made cars are not subject to that duty because of the free trade regime, yet they, rather than other foreign-made cars, are major competitors to Ukrainian producers," he said.
Dunina in turn said that in 2009 Ukraine's car market could fail to hit 200,000 cars. She pointed out to the invigoration in car sales seen in July and August, including due to more active crediting. However, Timofeyev added that to a certain degree this was linked with the beginning of forex rate fluctuations, when "people start investing money before it loses its value."
As was reported, an additional 13% markup on imported cars was in effect for six months from March 6 to September 6, 2009, and car producers initiated its prolongation for six more years because of the decline in car production in Ukraine by 85%.
At the same time, the Verkhovna Rada registered draft law No. 5080, drafted by MPs Serhiy Teriokhin, Valeriy Krainiy and others, which foresees a 10% car duty whose receipts are to be spent on the support of Ukrainian-produced commodities. The draft law has not been considered by the relevent committee of the Verkhovna Rada.
According to data disclosed at the press conference, with the overall decline of the car market of 78% in July 2009, the manufacturing of passenger cars fell by 55% (78% in June), while CKD assembly output decreased by 81%. Car imports dropped by 78%.
A total of 95,791 cars were sold in Ukraine January through July 2009, which was almost four times down year-over-year.
