When it comes to automobiles, there is no understanding between the Ukrainian consumers, domestic carmakers and the government.
Like many nations, Ukraine tries to protect its national producers with import duties and value added taxes, which boost government revenues.
Altogether, the taxes add 47 percent to a new car’s value and 170 percent to a used one, making automobiles more expensive than in neighboring European countries.
But drivers want reliable and preferably cheap cars, wherever they come from. Sales figures show motorists overwhelmingly prefer foreign-made cars over domestic-made ones. This leaves the few existing Ukrainian car producers on the brink of survival, with their share of the domestic market dropping from 47 percent in 2008 to just 10 percent in 2015.
Production stalled
The crisis forced half of Ukraine’s manufacturers out of business. The Ukrainian car industry worked at 2 percent of capacity in 2015, producing only 8,300 vehicles, down from 425,700 automobiles in 2008.
Ukraine has only one full cycle producer of cars ZAZ, based in Zaporizhya, and another manufacturer of Czech Republic-based Skoda cars which imports most of its parts.
Apart from that the country manufactures buses and trucks, which are performing a bit better than personal vehicles. Bus production factories are used at 10 percent of capacity, according to Yukhym Khazan, vice president of Ukrautoprom, the Ukrainian motor vehicle manufacturers association.
Khazan blames the industry’s decline on the lack of government support.
Ukraine’s automobile industry lost its competitiveness after Ukraine joined the World Trade Organization and import duty on automobiles fell from 25 to 10 percent. The market share dropped further after parliament canceled a car recycling fee in 2014.
The government also did not protect the domestic market against cheaper subsidized Russian vehicles. Until 2016, they were imported to Ukraine without any import duty under a trade agreement.
A potential customer looks at a car in Kyiv on March 30. (Volodymyr Petrov)
Used cars on high demand
At the same time, new car sales in Ukraine are shrinking as buyers opted for used ones, a byproduct of the financial crisis and expensive loans. New car sales accounted for only for 9 percent of personal vehicle sales in 2015.
The luxury segment remained stable, nonetheless, with the low-cost segment suffering the most.
Sales of used cars filled the void. In 2015, there were 500,000 such sales, including 10 percent imported.
Car dealers expect growth in used cars sales after VAT changes that reduce taxes to the amount paid on resale profit, rather than on the entire value of the vehicle.
“It is a good start for official dealers to take part in the used car industry, which helps the government, because the taxes get paid and helps the customer because they can go to an official dealer whom they can trust better,” says Petro Rondiak, the general director of Winner Imports Ukraine, the official dealer of Ford, Volvo, Jaguar, Land Rover and Porsche in Ukraine.
Used car imports have also seen big changes this year after Kyiv introduced European emission standards in 2016, prompting customers and dealers to import newer cars.
