"Zero" customs clearance has been operating in Ukraine since mid-April. You do not need to pay any taxes when importing a car from abroad. This intensified the car market in Ukraine and surprised Europeans. Why do Ukrainians have so many cars during the war, and what cars do they mostly buy? The answer to the question was found by experts of the Institute of Car Market Research.
There is a shortage of cars in Ukraine
Today the level of motorization in Ukraine is one of the lowest in Europe: 232 cars per 1,000 people. Ukraineʼs fleet is mainly replenished with used vehicles imported from abroad. Thus, in 2021, Ukrainians registered only 107.8 thousand new cars, while 533.2 thousand cars were brought and registered from abroad for the first time. In the domestic market (from hand to hand) sold 945.2 thousand cars. Thus, sales of new passenger cars in the structure of the automotive market of Ukraine accounted for only 6.7% of the total number of registered purchase transactions.
To achieve the European average of 610 cars per thousand people, at least another 15 million cars need to be brought to Ukraine. If the pace of imports is maintained, which is impossible in a state of war, it will take about 30-40 years, and this does not take into account decommissioned vehicles.
The war exacerbated the situation on the car market
With the start of a full-scale invasion, according to preliminary expert estimates, almost a million vehicles left the active part of Ukraineʼs fleet (of which at least 200,000 were completely destroyed). Sales of new cars fell tenfold. As of today, the number of offers for the sale of used cars within the largest online marketplace in Ukraine AUTO.RIA has decreased by 30% compared to February 2022.
Vehicles — first of all, the ability to be mobile in the rear, the ability to meet family needs, conduct business, as well as transport goods, goods and evacuate in case of danger. Thus, the problem of filling the car fleet of Ukraine is very relevant today.
According to preliminary estimates of experts, due to hostilities in Ukraine lost about 500 thousand cars. Another 300,000 left the territory of Ukraine. In total, about a million cars left the active part of the fleet. The purchasing power of Ukrainians has decreased, there are no domestic car manufacturers in Ukraine, and financial institutions have temporarily stopped providing credit and leasing programs for vehicles.
The greatest need of Ukrainians is for affordable cars
According to statistics provided by the AUTO.RIA marketplace, more than 60% of cars bought by Ukrainians cost up to $ 10,000. Cars worth more than $ 30,000 are less than 5% of the market.
Thus, cars with an affordable price category are in the greatest demand, and the number of citizens who can afford to buy luxury cars is critically low compared to the general demand for the car market. This is a natural consequence of the low purchasing power of Ukrainians, which in turn is a consequence of the relatively low level of per capita income (one of the two or three lowest in Europe), which will fall by at least a third as a result of the war.
The following cars were the most popular in the domestic market during 2021:
- Daewoo Lanos/Sens — 40 880 pcs.
- Volkswagen Passat — 30,697 pcs.
- Skoda Octavia — 27,996 pcs.
- Volkswagen Golf — 20,994 pcs.
- VAZ 2109/99 — 20,559 pcs.
From abroad used used most often brought:
- Volkswagen Passat — 30,664 pcs.
- Volkswagen Golf — 26 550 pcs.
- Skoda Octavia — 23 975 pcs.
- Renault Megane — 19,540 pcs.
- Ford Focus — 16,402 шт.
As you can see from the list, all cars are affordable. Premium models are not on the list of the most popular cars both in the domestic market and among imported ones.
"Zero" customs clearance solved several problems at once
In March 2022, the Verkhovna Rada adopted a decision on temporary exemption from customs duties on imports of cars from abroad for the period of martial law. According to the explanatory note to the bill, its purpose was to ensure efficient and uninterrupted operation of the stateʼs economy during the war. That is, the new conditions applied to all citizens of Ukraine, without any conditions, clarifications or exceptions.
This effective solution has solved several problems in the car market of Ukraine:
- It made it possible to buy affordable cars, for which there is the highest demand (which is not enough in Ukraine), abroad, and officially go through customs clearance without paying customs duties. In a situation where a significant number of citizens have lost their jobs, businesses and stable incomes, such savings significantly help the family budget.
- Stimulated related sectors of the economy. Temporary exemption from customs duties does not mean the abolition of customs formalities and other procedures. Which entails the payment of customs brokerage services, car certification, expert examination, registration in the Service Centers of the Ministry of Internal Affairs and payment of the fee to the Pension Fund (from 3% to 5% of the cost of the car). And also — provided work in the field of car insurance, service stations, sales of fuels and lubricants, etc., and in general makes citizens mobile and, as a result — more economically active. It has also saved jobs and reduced the forced relocation of Ukrainians abroad.
- Increased the mobility of Ukrainians during the war. According to the UN, the total number of internally displaced persons in Ukraine was about 11 million. About 2.8 million people were evacuated by rail. Bus routing was performed irregularly, air transport is still unavailable. Thus, about 8-9 million Ukrainians were evacuated by road, which is 3-4.5 times more than by rail. In many cases, the use of personal transport was the only way to evacuate from the hottest spots, that is, with a high probability — to save lives. As the war continues, ensuring the mobility of Ukrainians today is a strategically important issue.
- Provided opportunities for economic activity. Owning a car is an opportunity to be mobile, so you can get to work, or start your own business thanks to the car — such as taxis, delivery of goods, transportation, etc. Also, cars are very necessary for the transportation of humanitarian aid, the work of volunteers, and necessary for the needs of the army.
Regarding the global impact on the market, the "zero" customs clearance contributes to a gradual reduction in car prices, in most models by 20-30%. However, the massive decline in prices is constrained by the temporary effect of the law. It encourages sellers to either postpone the sale or try to sell the "freshly driven" car at market price. If the law is extended until a specific calendar date or its conditions are fixed on a permanent basis, the impact on the market will be more significant and natural.
In general, this decision has the greatest impact on the passenger car market. To fully take advantage of "zero" customs clearance for the category of trucks and buses prevents the limitation of the environmental standard to a minimum of "Euro-5", which for cars is set at a level not lower than "Euro-2".
Which cars are brought under "zero" customs clearance
As for the practical part of the law, since the beginning of the exemption from customs duties and according to the State Customs Service as of early May, 29,195 vehicles were imported to Ukraine. More than half of them (16,793 units) are cars worth up to 100 thousand hryvnias, ie cars of affordable price category, worth $ 1.5-3 thousand. 11,406 cars were worth from 100 to 500 thousand UAH; 760 cars — from 500 thousand to 1 million UAH; 196 cars — worth from 1 to 2 million UAH; and only 40 very expensive and elite cars — for UAH 2 million. (Mercedes-Benz, Cadillac, AUDI, LEXUS, BMW, etc.). That is, the share of really expensive cars in the total structure of imports of used cars imported under "zero" customs clearance is minimal, at the level of 1% of the total. Which confirms the general trend in the need of Ukrainians for cars of affordable price, worth up to 8-10 thousand dollars.
