Francois Mariotte is a newcomer to Ukraine who sees the potential of its car market.
Appointed as the general director of French car manufacturer Renault’s Ukrainian subsidiary on April 1, he considers Ukraine as an underexploited potential gold mine. Moreover, Renault hasn’t been doing too badly in Ukraine — it’s been among the top three in the country’s car market for the past three years.
But even though there are big opportunities in Ukraine, entering a developing country is a long-term process, says Mariotte.
“There’s a huge discrepancy between the car market in Ukraine today and its potential,” Mariotte told the Kyiv Post during an interview at his office in Kyiv.
In Ukraine, there are just 202 cars per 1,000 people, while in France, that number is almost three times as high, at 578 cars. This, together with the size of Ukraine — the biggest country in Europe by territory — tells Mariotte there is a lot of untapped potential for auto sales.
But quick growth won’t happen, he says.
In 2018, the country of 42 million people is expected to buy just 100,000 new cars. That’s a far cry from the peak in 2008, when Ukrainians bought 623,000 new cars and almost as many used ones.
Those sales were fueled by credit that dried up after the 2008 global financial crisis.
“The car market won’t hit two million units in Ukraine in the next five or 10 years, let’s be realistic,” Mariotte says. “Nevertheless it’s a big country with a very small car market, which means that year after year, as we improve the economic and social situation in the country, the car market will grow.”
Post-revolution
The low point for the car industry came after Ukraine’s EuroMaidan Revolution that drove Viktor Yanukovych from power on Feb. 22, 2014.
Sales plummeted to 35,000 units in 2015 — a huge hit for dealers and importers, “the most brutal evolution of a market that I have ever seen in my life,” Mariotte says.
Now Ukraine needs stability and trust from investors.
“And this is the job of the government, it’s the job of companies like us, and it’s the job of the population.”
Renault Ukraine
Renault’s office in Ukraine employs 60 people, responsible for managing customers, marketing and imports of cars and spare parts. The company also partners with 37 dealers across the country.
Renault doesn’t disclose its financial figures for Ukraine, but it does have a 12 percent share of the market among more than 25 competing brands. It sold 10,500 cars in 2017.
Renault’s sales in Ukraine are split between individual consumers and corporate fleets, with enterprises such as Ukraine’s police and state postal service Ukrposhta ordering cars in bulk.
Renault Logan was the second best-selling car in Ukraine in 2016 and 2017, according to Ukravtoprom, the association of Ukrainian car producers.
Euro-plate row
One challenge for companies such as Renault is to confront the law that allows Ukrainians to drive European Union cars they don’t own, dubbed the “Euro-plate” car market.
Within this scheme, Ukrainians buy used cars very cheaply from the E. U. The cars remain legally owned by E.U. citizens or companies, meaning that Ukrainians can drive them but avoid high customs fees. Even under the most conservative estimates, there are at least 300,000 such cars in Ukraine.
Mariotte points out that these cheap, older cars are polluters and sometimes unsafe.
High taxes
Ukraine’s car market has long been associated with high taxes for its consumers, but Mariotte says they are not as high as other places.
“I’m not shocked by the level of taxes,” he says. “In my previous job I was covering 44 countries, in some of them, when buying a car, one half of the price was the car itself, while the other half was tax.”
Ukraine’s consolidated tax is around 25–30 percent, which Mariotte says, is not one of the highest in the world.
What does make Ukraine stand out is low purchasing power and a dearth of affordable loans.
Plans for plants?
Renault is not planning to open any factories in Ukraine yet, but it’s not out of the question.
In Algeria, Renault opened a manufacturing plant in 2014 that accounts for 60 percent of new car sales in the African nation, he says. The same thing could happen in Ukraine, he says.
More security, more reliable electricity supplies, better road infrastructure and financial help, such as the cancellation of import taxes on car parts, would make the environment much more attractive, Mariotte says.
The import-driven company is not experiencing any problems at customs, hasn’t encountered raider attacks and has not had to resort to Ukraine’s courts to protect its interests.
“I was briefed before coming here that Ukraine is, unfortunately, known as a country where corruption is (rife),” Mariotte says. “Stopping corruption is absolutely necessary if you want to create trust. There is no doubt about this, if you want to be a modern country, a European country.”
Unstable currency
The unstable hryvnia has also made doing business more difficult for Renault. The company made a profit in 2017, but 2018 is “a bit more difficult,” as the hryvnia has plunged from Hr 28 per euro last year to today’s level of Hr 31 per euro.
“We’re selling cars in hryvnia, but we’re importing them in euros, so this weakening of the currency is not so positive for us,” Mariotte says.
Francois Mariotte
Title: General Director at Renault Ukraine
Nationality: French
Age: 52
How to succeed: “When we bring Renault to a country, we have a business model based on long-term development. We’re not just selling cars — we take care of the customer through the whole customer journey… We’re not short-term carmakers.”
