Imports of used cars: what will happen in 2022? Expert forecast
The past year has been quite successful for the Ukrainian car market. Despite the global automotive crisis, the pandemic and its aftermath, car sales have increased. According to the results of 2021, more than half a million used cars were brought to Ukraine. But will this trend continue in the next year, 2022? Experts from the Institute of Automotive Research together with partners, the largest platform for transport imports in Ukraine, WEST AUTO HUB, made this forecast for the import of used vehicles from abroad.
Experts call next year the year of opportunities. This does not mean that it will be easy for the car business in Ukraine — quite the contrary. However, as is often the case, there are usually opportunities for growth in times of crisis. The winners are those who know how to feel these changes and tune in to the right rhythm.
For example, temporary restrictions on entry into Europe in the spring of 2020 have changed all the logistics of delivering used cars from the EU to Ukraine, says Julia Rykovska, director of WEST AUTO HUB. The individual "fit" of cars was replaced by the delivery of cars in batches by large trucks. Subsequently, the borders were opened, but many participants in this business decided to continue to use this type of delivery. It turned out to be more convenient and often cheaper. "If it werenʼt for the pandemic, the transition process could take much longer ," she said.
" We are witnessing a de facto transition. From the natural — to the civilized market. From "singles" in the car business — to the formation of brands. From situational business to strategy and planning. And although we cannot look to the future, we can predict it. Our experience and knowledge provide such an opportunity, ”says Stanislav Buchatsky, head of the Institute of Car Research.
What to prepare for the car business, what are the possible changes and future trends in the car market of Ukraine — read on.
- Interest in used cars from abroad will continue to be high. If the legislation remains unchanged, the potential of imported cars in 2022 with mileage can be estimated in the range of 400-450 thousand units.
- The import market will be most affected by the effects of the global automotive crisis due to a shortage of semiconductors and microchips. In Europe and the Americas, due to the unavailability of new cars, cars with mileage began to rise in price. In Ukraine, this process is expected in the first half of 2022. Used cars from abroad can rise in price by 15-20%.
- There will be fewer factors in the market that will "distort" the situation on it. In particular, there will be no impact on the so-called "europlates", and there will be only official imports. Consequently, the market will be more predictable.
- The price structure of the car market in 2022 will not change significantly. 60% of car sales in Ukraine are cars worth up to 10 thousand dollars, due to the low purchasing power of Ukrainians. Preferences will change when, due to economic growth, it becomes possible to buy more expensive cars.
- According to statistics, Ukrainiansʼ preferences for specific models of used cars from abroad turned out to be quite stable. Significant changes in the list of the most popular cars in 2022 should not be expected.
- Due to the rise in price of used cars abroad, their lack and difficulties with buying, the quality of "freshly imported" cars may decrease. Since most offers on the Ukrainian market are sold at a lower price limit, buyers may prefer cars in worse condition, with higher mileage or certain defects.
- Attempts at fraud may increase. The desire to earn can motivate dishonest dealers to "twist" the mileage, hide defects or the real history of the car.
- As a result, the demand for technical inspection services abroad and vehicle history will increase.
- Problems with buying cars in popular European countries can motivate businesses to look for new ways to buy and new markets. Imports of cars from Georgia, South Korea (from 5% to 10%) and even exotic countries such as the UAE may increase.
- The share of cars from Europe will be at least 60% of total imports. The share may increase in the event of the arrival of large European companies in Ukraine, which may take place in 2022 due to significant interest in the Ukrainian car market.
- The share of " American " cars will be about 30-35%. However, difficulties with buying a car at insurance auctions and rising prices will force the car business to look for ways out. For example, due to the partial transition to the segment of cars without a past accident.
- The popularity of car auctions and platforms that sell cars after leasing will grow. Given the high demand and shortage of used cars on the market, these tools will give more chances to buy a car profitably.
- In times of pandemic and shortage of used cars, the winner is the one who will have the opportunity to buy this car at all. Preferably at a good price. And that often means buying in bulk, not one car. Preference will be given to those who have a history of cooperation with foreign dealers. Simply tracking ads on the Internet will not be enough.
- Quarantine conditions have provoked the development of online services. Including in the automotive business. Today you can buy, deliver and register a car remotely. In 2002, the demand for such services will only increase.
- The automotive business will look for ways to reduce the cost of processes. Automation will be developed, for example with the help of specialized CRM-systems.
- The formation of a civilized market and its transformation will continue. There will be a transition from "individual" to collective business. There will be even more brands, platforms and companies. At the same time, competition will increase. The car business will have to look for ways to grow. For example, using automotive market analytics to increase sales.
- The sphere of financing the purchase of vehicles — car loans and leasing programs will be developed. This market segment has great potential and may become one of the main tools to increase sales in the automotive business in 2022.
- Foreign car companies will be increasingly interested in the Ukrainian market. Market dynamics will contribute to this.
- The introduction of mandatory roadworthiness tests for private cars can have a significant impact on import trends. If this procedure is organized according to the European model, cars in poor technical condition, with "cut" catalytic converters and soot filters may become less popular. Today, only the price of a car is decisive, because no one controls such phenomena.
- New customs clearance rules may also change the import market in 2022, if they are adopted. This is a " customs clearance in the smartphone ", which was recently announced. However, from December 2, 2021, the mechanism did not work. This means that the implementation of innovations will take more time than announced by the authorities. However, the movement towards "cars on the phone" will definitely be, because digitalization is one of the main directions declared by the current government.
- Another innovation that may be introduced next year is the possibility of registering a "freshly driven" car with mileage directly on the parking lots, without visiting the Service Center. The way it works with new cars.
- Imports of used cars may also be affected by changes in the approaches and systems for determining the customs value of vehicles. If this area becomes more transparent, clear, predictable and less corrupt, it will develop even more actively.
- Changes in the mechanism for charging taxes on imports of used cars should not be expected. In any case, all amendments to the Tax Code belong to the exclusive competence of the Verkhovna Rada of Ukraine. In order to change taxes on cars, it is necessary to go through the whole process of adopting the bill. And this, as practice shows, is a difficult and protracted process.
As with any forecast, it is important to understand the risks and factors that may adversely affect the market. Experts identify several main ones.
- Exchange rate fluctuations. Most Ukrainians earn in hryvnias. The growth of the dollar reduces purchasing power in the car market, because its prices are formed in the currency. The euro-dollar exchange rate should be singled out, as historically cars in the EU have been sold for euros and sold in Ukraine for dollars. The depreciation of the dollar also negatively affects the ability to buy a car from abroad.
- Economic crisis and political instability. The more fluctuations, instability and less income people have, the less they will buy a car. Even more: it has been proven that people buy cars not when they have money, but when they are more confident in the future.
- Changing laws. If certain groups of influence manage to lobby for a change in the current rules of imports — to increase taxes or introduce stricter environmental standards — the market may return to the level of five years ago. Some people working in the car business will lose their source of income. The state budget will receive less revenue. Related businesses will also earn less. The appearance of another wave of "europlates" is not ruled out. Therefore, the association for the protection of economic interests — another challenge in 2022 for the business of importing used cars.
Read the forecast of the market of domestic resale of used cars with mileage, developed together with the partner of the Institute of Research of the car market, the company AUTO.RIA, in the following publications.