The unprecedented rush at the domestic car market in 2007 is astonishing even for seasoned experts. There was even no traditional “summer lapse”. The buyers snatch away any cars. The Ukrainian motorists choose more often the brands whose dealers offer not only attractive prices but also full service – from car change in line with the trade-in system to leasing sales. The buyers are whipped up by the banks: during the first half of 2007, the loans for purchasing new cars went down on the average by 1 % p.a. in hryvnya and 0,5 % p.a. in US$. Who will turn away from such attractive offers? The buyers do not hesitate neither over the queues for obtaining the most popular cars (sometimes you have to wait for 6 months) nor queues to the service centers the construction of which is lagging far behind the car fleet growth. As early as in October 2007, in compliance with data of AUTO-Consulting information-analytical group, the new record of new cars sale was set. Joint efforts of dealers resulted in the sale of 57 000 cars exceeding by 70% (!) the October sales of 2006 and 14% more than in the very successful September.

The overall market rise enabled virtually all dealers to register good results in October however there were also “losers”. The dealers of Mitsubishi made a new spurt having offered in October a new modification of Outlander XL 2,4. The car sold out “by storm” and added several points to the brand. However, the biggest splash of October were sales of Hyundai and KIA. These two Korean manufacturers have occupied nearly 9% of Ukrainian market, ahead of Toyota and Chery. The main reasons behind this dynamic sales growth of Hyundai and KIA are optimization of sale process, competent marketing actions and targeted advertising. Judging by sales, Hyundai Tucson is becoming sort of a “national car” in Ukraine Toyota saw itself in October 2007 at the 9th place. When have we seen this the last time? The Japanese favorite did not demonstrate in this month any dynamics. The experts of AUTOConsulting see several reasons: in the first place, the unfavorable Euro course kept back sales of “official” cars, in the second place, schemes of importing “grey” Toyota cars were brought to a stop. The importer of this brand should try to keep the market by experimenting with marketing actions.

In October, already 13 brands have overcome the figure of 1000 sold cars. Besides those mentioned above, these are Nissan, Opel, Volkswagen.

In the premium segment Lexus as before is leading the pack; the market has somehow overseen emergence of an official dealer in Kiev. On the other hand, the action of Mercedes-Benz with price-cutting brought its results.

Preconditions – the year 2006 – 9th place in Europe

Starting from the year 2002, the car sales were growing annually on average by 40%. If in 2002, 107 000 cars were sold in Ukraine, in 2004 this index totaled 212 000. In 2006, 371 019 cars were sold in Ukraine, that is, 39,68% more than in 2005. This figure has been predicted by experts since the middle of the year, after an unexpected splash of the spring 2006. (In this way, the year 2006 became more successful for the motorcar companies than 2005 when there was a rise of 25%). In addition to the quantitative growth, our car market has changed in 2006 also in a qualitative way. After July 1st 2006, when EURO-2 environmental norms were introduced, the market saw a rapid growth in foreign-made car sales, against a background of a decline in sales of cars manufactured in the CIS countries.

It is very indicative that by the end of the year the sales ratio – foreignmade cars : CIS made-cars reached 68 % against 32%, whereas a year ago the proportion was 50 : 50.

Spectacular advance of foreignmanufactured cars at the market has substantially changed the alignment of forces in the leading group. Even irrespective the quantitative growth which enjoyed virtually all manufacturers, some of them lagged behind the market growth and forfeited their previous positions. In terms of European dimensions, Ukraine managed to occupy, by the market volume, the 9th place in Europe, leaving behind Austria, Sweden, Greece, Poland and Portugal. And just a year ago, Ukraine was at the place 12. It is also noteworthy that in 2006, Mitsubishi and Toyota were immediately behind the leading group (VAZ, Daewoo, Chevrolet, ZAZ ans Skoda). The growth in sales of expensive foreign-made cars is evident; more and more Ukrainian buyers give preference to these cars. If in 2005, the most popular models were cars with the price up to € 10000, in 2006 the buyers’ interest clearly shifted to more expensive cars.

The same trend has been characteristic also for premium brands; not only their quantitative sales have grown but also the market share.

Phenomenon of the Year 2007 – 7th Place in Europe!

By the number of new cars sold in 2007, Ukraine has occupied the 7th place in Europe. Thus, Ukraine has been able to leave behind the Netherlands and Belgium where the car market is stagnating. Ahead of Ukraine are only the biggest motorcar nations as Germany, Russia, France, Italy, Spain and UK. Ukraine possesses a potential for the subsequent growth, just as Russia. In Europe, the positive dynamics of the motorcar market is being observed. The August growth equalled + 2,5%. At the same time, the situation at the biggest markets is rather ambiguous. If in Germany there is a decline (-2,2%), in Russia, on the contrary, the market growth is more than 30%.In Ukraine, the August growth was at 53% which is one of the best indexes in Europe.

Given the ever-increasing status of Ukraine as one of the most successful markets, one might expect a change in the attitude to Ukraine and its price policy from the part of manufacturers. However that may be, the car manufacturers always used to monitor with keen interest the situation at the markets of Germany, Russia, France, Italy, Spain and UK. Now, Ukraine will be among these nations.

It is significant that it will be not that easy for the Ukrainian car dealers to reach the 6th place in Europe as the UK market exceeds the Ukrainian one by 50 % and the Spanish one – by 100 %. Yet the experts affirm the Ukrainian market has very good prospects and it could grow up to 1 million cars in a year. With this result, Ukraine may count on the 5th place in Europe, among large and economically strong countries. The status of one of the biggest markets in Europe will contribute to the investments inflow to Ukrainian motorcar industry. The Ukrainian market in itself looks very promising, the more so since dozens of car-making plants are located (or being constructed) in the competitor countries. In fact, Ukraine is the only country among the top ten where until now not a single car producer has come to. Be that as it may, the biggest car market is being formed in the heart of Europe which can rival by its capacity the markets of all countries of Central and Eastern Europe taken together but completely deprived of attention from the part of global car manufacturers.

Prospects

The expected Ukraine’s entry into the WTO will be the most important factor which will impact in different but very noticeable ways the position of various brands at the domestic car market. As soon as Ukraine will be admitted to the WTO, the customs duties for the import of foreign-made cars will be reduced by 15%.

It is quite evident it will be a hard blow for the Ukrainian car manufacturers as they cannot openly compete, for the time being, with foreign companies. “In the long run, the car market in Ukraine will reach 1 million cars in a year” – this forecast was made by experts at the Metropolitan Car Show-2007. In their opinion, the sales rates in 2008 will equal some 600 000 cars. Then, the market growth will slow down but sales will increase. Afterwards, the expansion will follow mainly two paths: new purchases and exchange of outdated cars (more than 4 million cars). That is, it seems possible to assume – even with regard to the current situation in the economy – an activation in the area of car loans; moreover, the secondary market remains “virgin lands” waiting for exploration. More than 4 million cars are waiting their turn for renewal; given reasonable stimulating programs, their owners will be interested to exchange them for the new ones.

It is evident that in order to reach the sales figures above, it will be necessary to invest considerable amounts into sale and service networks, not to mention the road infrastructure, parking lots etc. Ukraine is not ready for a market of 1 million cars; however, the thirst for motorization will make this future nearer. This sale amount implies that only in Kiev there will be up to 20 000 cars more every month, with today’s 10 000.