Increase in Auto Sales

Neither the tariff hike on imported cars nor an economic slowdown could put a brake on demand for cars in 2005.  In fact, many car dealers saw impressive sales, indicating that Ukrainian's purchasing power is growing.

According to Auto consulting, a Ukrainian auto industry consulting firm, Ukrainians bought a total of 285,000 new cars in 2005, 30% more than in 2004.  Growth looks even more impressive in light of last year's tariff hike (from 15% to 25%) on imported cars.  With interest rates on car loans at their lowest level in over a decade, sales are likely to rise by another 20 percent in 2006.  Over the last year, Ukrainian banks issued about $1.5 billion in car loans, which now account for more than 30% of those bank's retail loan portfolios.

Russian cars, which are brought into the country tax-free, still dominate the Ukrainian market.  The most popular Russian brand-VAZ-has increased its market share by 15 percent since 2004, grabbing 35 percent of the subcompact car market last year.  Czech-made Skoda was the most popular foreign carmaker in Ukraine last year selling more than 10.000 cars, 70% more than in 2004.  Foreign carmaker such as Japan's Toyota, Mitsubishi and Nissan have been quick to take advantage of the weak local competition, opening a record number of dealerships last year and increasing sales by 40 percent across the board. European carmakers Renault, BMW, Peugeot are present in Ukraine, as well.

Faced with an overproduction crisis, Chinese carmakers are now eyeing the Ukrainian market.  Atlant-M-Chinese cars last fall, has since sold "a couple dozen" pick-ups each month, said Anatoly Grek, the dealership's general director.  Some market watchers believe that the Chinese cars of today are like the Korean cars of the previous generation-simple and cheap.  Pickups made by Chinese companies Xinkai and Great Wall are priced at about $14.000.

January-February, 2006

Commerce

Page 6