The year 2009 has been difficult for car dealers. A near-total freeze of credit has turned a booming industry into a crippled one. This year, dealers expect to sell 130, 000 cars, a more than four-fold decrease on last year’s 623, 000.
All the way up to the end of this year, the market will mostly have two types of cars for sale: those made in 2008 at the lowest prices possible, and others made in 2009 at prices that are not much higher.
But the best time to buy a car might not have come yet. If you wait until December, or even January 2010, dealers will be doing their utmost to sell off the models produced in 2008-2009.
Next year’s models will almost certainly be more expensive, by at least 10-15 percent.
Car manufacturers tend to raise their prices by at least 5 percent per year. But transportation, taxes, customs clearance duties and importer and dealer margins add up to the cost as well.
None of the importers are finishing this year without losses. Before the crisis hit, the importers’ margins were hovering around 10 percent, and average dealer margins were around the same. Auto dealers were forced to halve their margins at first, but they’re starting to go up again. The hope is they will return to pre-crisis levels next year. This, of course, will translate into higher prices for buyers.
The main source of headaches for the operators on the car market in Ukraine is whether taxes on new imported cars are going to change, and how. A 13 percent import duty which affected brand new cars and other imports expired in September. But will the 10 percent duty on brand new car imports stay at the current level? Or will the national producers and national assemblers of imported kits be able to lobby a fresh increase on import duties for new cars?
Considering lawmakers will be heavily involved in the election campaign until the February -round runoff of the presidential contest, I will risk to make a prediction: At least until the end of the year, the current 10 percent duty will remain in place, which will marginally enliven the market, allowing importers to bring to Ukraine new, fresh cars at reasonably attractive prices.
This will be the main driver of growing competition among various brands. And, most importantly, the Ukrainian consumers will be able to enjoy the lowest car prices in Europe until the end of the year.
You see, despite the import duties, prices on cars in Ukraine are still very competitive because: 1) hryvnia prices on cars have not changed much despite the domestic currency’s big plunge from last year; 2) when dealers import brand new cars into Ukraine, they get big discounts of up to 20 percent from suppliers in Europe, who are either dumping to capture market share, or trying to get rid of existing stock.
Among the European brands, the leadership position in sales will most likely be preserved by Skoda. The Czech auto group has the biggest network of dealers in Ukraine.
Among the Japanese, it’s Toyota and Mitsubishi who can expect to fight for a bigger share of the market, with their budget PR and Price models.
Among the Koreans, the fight is between KIA and Hyundai. Similar in quality and design, they are fast growing world auto-monsters.
Among the French brands, Renault is likely to be gaining market share this year, especially after its budget model, Dacia Logan, was redressed into the Renault brand.
So, what models will be the best-sellers in Ukraine?
Among diesel cars, people will choose Hyundai Accent, Ford Fiesta, Ford Focus, Renault Logan and the old Skoda Octavia Tour. Others will probably not be able to compete.
Among the gasoline cars, competition will be among Mitsubishi Lancer, Skoda Octavia Tour, Skoda Fabia, Suzuki Swift, Mazda 3, Ford Focus, Hyundai Accent, Kia Cerato New, Nissan Almera Classic, Nissan Micra, Toyota Corolla, Chevrolet Aveo and Lacetti, Lanos, Seat Cordoba, Lada Kalina, Volkswagen Polo and Renault Logan.
These are the cars that are currently abundant in warehouses, and dealers will continue offering discounted prices until they unload their stock.
Domestic producers in Ukraine have a future as long as they preserve their strong lobby in parliament. There are no signs that they’re planning to invest into new age, cleaner cars, hybrids, etc. In the foreseeable future, they are most likely to remain domestic assembly businesses whose only purpose of existence is to evade import duties on ready-made cars.
The mass buyer is expected to spend between Hr 80, 000 to 130, 000 per auto. The models that fail to be reduced to this price will have every chance to go on sale 2010 with large discounts.
The statistics of the last few months show that between 7 and 14 percent of all new cars are paid for via loans. In other words, more than 85 percent of new cars are sold for cash. From talking to dealers all over Ukraine, it seems that most of the clients buying with cash are those who got their deposits out of banks and want to capitalize on bargains.
So, what are their criteria for choosing a new car? Naturally, second to price comes the issue of safety, service prices, economic fuel consumption etc.
Are Ukrainian consumers any different from their European counterparts? Firstly, Ukrainians more often give a preference to an automatic gear box. And Ukrainians are not afraid to buy dangerous Chinese brands. In Europe, these cars cannot pass the simplest of crash tests.
Ukrainians less about the interior design of a car, or the air they breathe while driving, let alone the number of airbags in the salon. In Europe, most brands offer four airbags as a basic safety standard. In Ukraine, the most popular models either have no airbags or ABS, or only one or two airbags.
All this can be attributed to the slow evolution from Soviet car safety standards to modern European safety rules. But primarily it suggests Ukrainians are ruled by price more than anything else while buying a car.
Bogdan Prots is the director for development of dealership network for Seat in Ukraine. He can be reached at [email protected].
