With the beginning of Russiaʼs invasion of Ukraine, the local car market froze. It is obvious that in the first, worst days of the war, Ukrainians did not want to buy new cars. And while the used car market remained active and even saw some growth, new car sales fell tenfold in March. Whether the Ukrainians are ready to buy new cars in the future, researched at the Institute of Car Research.
In March, Ukrainians bought only 546 cars. This monthly figure is a record low. Even in the first "crazy" months, when many companies and government agencies were temporarily out of business due to the pandemic, sales were at the level of 4-6 thousand new cars. Thus, the market fell by 94.1% compared to March 2021.
In total, since the beginning of 2022, 11.2 thousand new cars have been registered in Ukraine. During the same period — the first quarter of 2021 — Ukrainians bought 21.9 thousand cars in showrooms. That is, the quarterly decline in the market is slightly smaller, but also large — minus 48.9%.
It makes no sense to describe the rating of car brands and models with such a meager number of sales. It is more interesting to see what the Ukrainian market was like before the war and to model the possibilities of its recovery in the future.
Ukrainian car market before the war
The peak of sales of new cars in Ukraine was recorded in 2008 — 623 thousand new cars. These figures were achieved primarily through protectionism in the automotive industry — the legislation was written in such a way that the import of used cars from abroad was effectively banned. That is, Ukrainians were deprived of a choice, and dealers of new cars and especially Ukrainian car manufacturers were in a non-competitive environment.
The success of sales was also supported by, at first glance, affordable lending, which was issued to almost everyone without restrictions, but at high interest rates. Thus, the number of purchased new cars on credit reached 50%. However, financing was issued in foreign currency and US dollars. After the 2008 financial crisis, which was caused in part by massive foreign currency lending, the hryvniaʼs exchange rate against the dollar rose by almost 60%, creating problems for the banking sector and driving many people into debt.
In the same year, 2008, Ukraine joined the World Trade Organization, which forced the lifting of age restrictions on imports of used cars to Ukraine. Against the background of the economic crisis and declining purchasing power of Ukrainians, sales of new cars were declining.
Then there were many events that also affected the countryʼs economy: the annexation of Crimea by Russia, the start of hostilities in eastern Ukraine, the budget deficit. The historical minimum of sales was recorded in 2016: 65.5 thousand cars. The market began to recover only in 2017, when for the first time in 8 years sold more cars than a year earlier — 82.7 thousand. All subsequent years were more or less stable for the market. "Kovidny" 2020 brought a drop of only 3.2%, with the number of cars sold at 85.4 thousand.
In 2021, Ukrainian new car dealers sold 107.8 thousand new cars. For the first time since 2014, the number of new cars purchased by Ukrainians in a year has crossed the 100,000 mark. Most of them — 97.6 thousand — were brought from abroad. Compared to 2020, imports of new cars increased by 19.3%. Thus, the impact of the global shortage of new cars on the Ukrainian market was minimal.
The Ukrainian car market has not felt the negative impact of the shortage of new cars, primarily due to its small size, said Stanislav Buchatsky, head of the Institute for Research in the car market in Ukraine. The fact that the record for Ukraine is a percentage of the world market. Dealers in 2021 managed to meet demand primarily because it was small. Unfortunately, the purchasing power of Ukrainians in recent years was too low for the mass purchase of new cars. at the beginning of the Russian invasion, it decreased even more. "
Interesting processes were recorded by experts in January — the sales leader changed, and two of the ten most popular models were Chinese Chery cars. This is due to the fact that Chinese brands were available for purchase at a time when other models had to wait a long time.
In general, the TOP-10 most popular new cars in Ukraine in January looked like this:
- Renault Duster — 469 pcs.
- Toyota Land Cruiser Prado — 154 шт.
- Toyota RAV-4 — 151 шт.
- Chery Tiggo 2 — 144 pcs.
- Hyundai Tucson — 140 pcs.
- Nissan X-Trail — 126
- Renault Koleos — 122
- Peugeot 301 — 107
- Chery Tiggo 4 — 100
- Chevrolet Cobalt — 95
Are Ukrainians ready to buy new cars now?
According to the International Organization for Migration, the number of Ukrainians who were forced to leave their homes and move to safer regions of the country reached 6.5 million, and more than 3 million people went abroad. This, firstly, changed the geography of car sales. The center of activity in the car market has shifted from the center of Ukraine to the west.
Second, the war is changing the priorities of buyers. Obviously, during the active hostilities in the country, not everyone is ready to buy a car, even if he has the funds.
Third, the purchasing power of Ukrainians is declining. The economy as a whole suffers, established economic ties are broken, and some people lose their businesses or jobs. Those who previously planned to buy a new car are forced to change their plans.
Fourth, banks in Ukraine have suspended financing programs — leasing and lending. According to experts, about 25% of new cars were bought this way, so this fact will also constrain sales.
However, despite all the above factors and low sales in March, in April the number of views of new car offers in online catalogs and calls to dealerships that have cars available began to increase significantly, according to Ukraineʼs largest online marketplace AUTO.RIA.
In a survey conducted by the company, not only local residents of the mentioned regions, but also citizens who arrived there temporarily announced their intention to consider buying a new car. Obviously, this need is due to significant damage or loss of their own vehicles as a result of hostilities. Displaced persons from Kyiv, Lviv, Vinnytsia and Khmelnytsky oblasts most often reported their readiness to consider this option.
At the same time, almost 24% of respondents considered buying a new car before the war and do not intend to abandon their plan even now. There are many people who will be forced to do otherwise: every fifth respondent was previously going to buy a new car, but now leans in favor of used. Almost half of the respondents (43%) plan to buy a car only after the war.
When asked about the factors that may influence the decision to buy a new car, more than half of respondents (56.4%) said that there are guarantees of further security of Ukraine and the recovery and further development of the economy. Also, 26% of potential buyers will expect the restoration of favorable lending conditions and favorable offers from dealers.
Conclusion
We should not expect a quick resumption of sales of new cars. At least — to the Victory of Ukraine in the war. As soon as the situation in the country improves, sales of new cars will begin to grow, although the basis of the market will continue to be cars with mileage.
Sales of new cars will directly depend on the countryʼs economic recovery, increasing the purchasing power of the population and restarting lending programs. It is desirable — at reasonable interest rates, as an option — with the help of government programs. Special conditions of dealers, as well as changes in tax legislation, which could make buying a car more affordable for Ukrainians, can further increase sales.
