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Sunday, February 11, 2018

Maidan has enriched Ukrainian officials

While the Ukrainian car industry is dying in the country dramatically increased the demand for new cars, and foreign cars premium significantly. This contrasts sharply with the situation in the economy and impoverishment of the Ukrainian population. What is the reason for such an unusual increase in consumer demand for luxury vehicles?

The production of passenger cars in Ukraine in 2016 fell by 23.2% compared with the previous year – on-year to 4.34 million units of transport. It is reported by Association “Ukrautoprom”.

“This shows once again that after the Maidan “kickbacks and drifts” significantly increased and new “fighters against corruption” to buy themselves expensive toys”

Simultaneously, at the end of last year, production of commercial vehicles in the neighboring country fell by 65.4% to 603 of cars and buses 64.2% to 321 units.

Overall for the year 2016 Ukraine produced 5,264 thousand cars, it is 36.5% less than a year ago. The largest manufacturer of passenger cars in the country is more recently a factory “Eurocar” in the Transcarpathian region. Last year he released 3,937 thousand cars of Skoda (plus 93.9 per cent). But once the largest Ukrainian manufacturer ZAZ – went virtually into oblivion. Over the years it has collected a total of 526 machines – an average of 43 cars per month. For comparison: in 2007 on ZAZ was collected about 300 thousand vehicles per year or 25 thousand pieces per month. Then it was about the cars under ZAZ brand, but also under the brand VAZ, Chance, Lanos, Chevrolet and KIA. Of course, the decline in production at the plant began in 2008, immediately after Ukraine’s accession to the WTO, and zero duties on imports. Competition with foreign cars of local models, it became difficult to sustain. However the plant was kept afloat by satisfying the existing demands of Ukrainians in the cheapest local car, and even in exports to Russia sent products. For comparison: to the Maidan in 2013 Zaza has collected more than 50 thousand vehicles, now 100 times smaller. In fact, we can recognize that car production at the plant stopped.

No better fate and another automotive Assembly plant “Bogdan”. Although in 2016, he increased production by 30%, but this growth is not worth much. Because the pieces the factory has collected a total of 78 cars vs 60 pieces in 2015, hence the illusory growth percentage. And once it was also quite a large industrial enterprise, one of the owner which, incidentally, was Petro Poroshenko. In 2007, the Corporation was able to begin licensed production of three models of Hyundai. There is also going to Kia and AVTOVAZ under the brand “Bogdan”. However, with the Russian plant, the cooperation was stopped in April 2014. And a month later Cherkasy automobile Corporation and still works. Although in 2015 we talked about the plans to collect models of Hyundai, but no cars have not rolled off the Assembly line. The Corporation still held only by a tiny government orders (dozens of pieces) of the national guard and the interior Ministry of Ukraine on buses and trucks.

The situation in the economy and severing ties with Russia finally killed the local car industry. His job was done and the devaluation of the hryvnia. The IMF was very much mistaken when in 2014 claimed that the devaluation of the hryvnia will help Ukrainian producers and exporters. In practice it backfired, and the auto industry is the clearest example. Because the IMF experts did not go into details. “In the production of cars of mark ZAZ, the share of Ukrainian materials and components more than 50%, but energy and raw materials for their production are imported. As a result, the devaluation of the hryvnia has led to what has grown and the cost of Ukrainian cars. This shows again that it is impossible due to the collapse of the hryvnia to stimulate import substitution”, – says Ukrainian economist Oleksandr Okhrimenko.

However, what is surprising is another fact. Judging by the falling wages and the crisis in the economy of a neighbor, the possibility of Ukrainians for the purchase of expensive cars had come to naught, as the local production. So happened in 2014 and 2015, when the retail market was falling. But in 2016, the new car market just miraculously blossomed, and sales of cars of a premium class the most.

Thus, according to the Ukrautoprom, in 2016, Ukraine has sold more than 65 thousand cars, that on 41% more than the year before. Especially rapid growth was observed in spring in March, for example, sales of new cars rose by as much as 117%. Even in the fall, despite the liberalization of import of used cars in August, the new car market continued to grow by leaps and bounds: in September – 32%, in November – 50%.

The most popular among Ukrainians new cars Toyota, Renault and Volkswagen. While sales of premium cars to grow significantly more than the overall car market. So, sales of the new Lexus has increased over the year by as much as 141,5% (total sold 1164 units), Mercedes-Benz – 102,3% (2464 car), Audi – 73% (1674 car).

Based on international practice, the automotive retail market is an excellent indicator of the state of the economy. When growing wealth and economy, sales of new cars increase. When you start to fall sales of new budget cars, then in the country the crisis begins. When the process of the fall has come to the expensive cars, the crisis has spread to all corners of the economic activities of the state. In Ukraine there is a paradoxical situation: GDP and well-being of the population significantly shrunk, the country continues to rage crisis. The positive is that now we can say and expect the Ukrainian economy is that the decline slowed down at a very low level, perhaps, found the bottom. But to return to welfare in 2013 still can take years and decades to come. If in 2013 the average real wage in Ukraine amounted to 400 dollars, in 2016- just 197 dollars. Therefore, the growth of sales of new cars, especially expensive, in 2016 just distracting from economic theory and the experience of other countries.

However, Ukrainian economist Oleksandr Okhrimenko easily solved that mystery. “The dynamics of growth in new car sales in 2016 compared to 2015 shows that the population begins to spend the money. Some of this money, which the population was taken from Bank deposits and in part the income received on currency speculation, and various kinds of fraud in the sphere of trade and public procurement. Ukraine returned to the 90-ies, when all sorts of “reformers”, earning his first million on “reform” in a hurry to spend it on a new vehicle to the boys praised the “breadth of scope”. As always,” – explains the economist.

“It is noteworthy that a very large increase was recorded in the sale of very expensive cars of the “Mercedes-Benz”. This again shows that after the Maidan “kickbacks and drifts” significantly increased and new “fighters against corruption” to buy themselves expensive toys” – sums up Okhrimenko.


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