A special duty on import of new medium cars has been in force for over a month in Ukraine. It makes 6.46% for cars with the engine of 1-1.5 litres, and 12.95% for cars with the engine of 1.5-2.2 litres. The decision was under long discussion at the highest level, including Ukrainian state structures an European business representatives. Though this measure is temporary (three years), experts believe it will help Ukrainian car industry to find a new lease of life.

Ukrainian car industry: current state

In post-crisis years the Ukrainian car market has been demonstrating rapid sales growth of imported vehicles and drastic dip in sales of domestic production, vice president of the "Ukravtoprom" Association Yefim Khazan says. "The matter concerns all kinds of vehicles - cars, trucks, buses, etc. As a result, Ukrainian producers have lost their position on the market. In 2008, import covered 49% of internal consumption, and in 2012 the figures showed already 80%. Import of cars has been growing since 2010. In 2010 it grew by 75%, in 2011 - by 58%, in 2012 - by 21%. Last year the import of cars made 4.3 billion dollars, while the export hardly reached 0.3 billion dollars," he says. The situation has resulted in loss of tens of thousands of jobs. "Capacity utilization of our plants was only 20% last year, which caused price rise and loss of marketability. Prime cost of one car increased twice comparing to 2008," the expert notes.

According to him, CIS countries, mainly Russia, used to be the main market outlet for Ukrainian car industry. "95-97% of our production had been exported in Russia, but from September 1, 2012 Russia introduced the utilization fee, which decreased marketability of Ukrainian cars and made our trucks and buses totally non-competitive on Russia's territory," Khazan reminds.

He also noted that for the past ten years Ukrainian car industry has experience both, all-time growth and drastic fall. "In 2003-2008 the volume of production had increased fourfold, but  in 2009-2012 it decreased by six times. The loss of external market and internal market shakeout have created a critical situation." For this, according to Khazan, representatives of car business appealed to the Interdepartmental Commission on International Trade with a request to find a solution.

The Commission, in turn, held an investigation and came to the conclusion "to protect domestic producers." Thus, a special duty on imported cars has been introduced. Ukrainian car industry now has three years to recover production rate and return jobs to 30 thousand workers, dismissed earlier due to layoff.

Ukrainian car for every Ukrainian citizen

New workings places are a good thing, but personal interest is more important for us anyway. So, if you have been collecting money for your first foreign car, the news about price rise will not make you happy. Experts-importers, in turn, deny any price rise. "Analyze prices for similar production in other countries and you will see that pricing basis is not duties and taxes, but interest to the market. In Russia, for example, duties are 25-30%, but prices for cars are lower than in Ukraine. Importers protect their working places in their countries and economies. Ukrainians should do the same," Oleh Boyaryn, head of the supervisory board of the private joint-stock company "Eurocar", says.

Those potential 150 thousand of Ukrainian buyers, who planned to buy a foreign car, will not have to abandon the idea, vice president of "Ukravto" Oleh Papashev promises. "These people will be able to buy Ukrainian cars, as they are cheaper. And I am not speaking about "Zaporozhets". I want to remind that we have capacities to produce foreign brands. Our "Avtozaz" used to producer "Lanos", which had been sold in Russia as "Chevrolet" and "Cherry". In 2008, Zaporizhya car plant produced 140 thousand cars. 75 thousand were exported and the rest was bought by Ukrainians. Back then there were 20 thousand people working in the plant, but as of March 1 of this year less than six thousand workers remained, meaning 14 thousand people have joined the ranks of the unemployed," Papashev says.

"The majority of those who speak about duties and discrimination they bring have been investing billions into Russian production and now bring this production in Ukraine. For five years we have reduced 19 thousand working places. In Germany, for example, people start strikes because of one thousand. The matter does not concern some particular Ukrainian producer. We just say that producers should understand that if they want our market they should come, invest and build here. It won't limit buyer interests, but otherwise," Boyaryn promises. According to him, all parties will gain if investors come to Ukraine - the labor market will have thousand of vacancies to offer, the state will get revenues from taxes and citizens will be offered adequate quality-price ratio.

According to him, the reaction of the foreign business to the introduction of duties is just an attempt to protect national interests of foreign economies. "This is an information war, declared by importers who defend their business interests. And we are losing it. Have you ever heard about Ukrainian producers arguing with the government of Germany, for example? We are being manipulated. We are fighting for our working places, and they are fighting for their," Boyaryn says and calls upon Ukrainians to demonstrate healthy patriotism and boost the coffers of own state, not others.

Moving from state interests to personal ones, we still wonder how good the promised cheap cars of domestic production will be. ForUm has addressed this question to the vice president of "Ukravto" Oleh Papashev. "It is easy to make a good-quality car: take all the pieces, put them together and the car is ready. The quality of the car depends on the quality of materials, parts and components it is made of. We seek to use more Ukrainian materials, however, 50% of materials "Avtozaz" works with are imported. Moreover, out plants will produce world brands. It does not really matter where the car was assembled - in Poland or in Ukraine," he says.

The Economy Ministry reminds that domestic car industry has three years to recover. "The car industry has been given three years of grace to adopt market conditions and modernize the process. If you have questions about expediency of such decision, look at the economies of Russia or US. They did no have any doubts on whether to protect consumers and let the industry die or not. They just took money of  taxpayers and put it into the car industry, even considering that this sector is not the leading one in these countries. If we want to have independent economy, we have no other choice to take this decision. However, the state cannot protect the industry forever. It must change and start producing adequate products, because we cannot keep the duties for an eternity," head of the department on strategic planning of economy development  Yevhen Oliynykov says.

Well, soon we will learn whether Ukrainian car industry lives up to expectations of the state and business. Meanwhile, Ukrainians will have to choose between foreign cars and domestic products. Well, the choice is yours, dear fellow countrymen.

Tetyana Hryhoriyeva


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