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The Year That Counts For Two

Oleksiy Yashchenko,
Business Analysis Manager
Winner Imports Ukraine

It is no secret that when people work under severe conditions, you can motivate them by counting their time record at a specific rate. As for the 12 recent months in the automotive industry, it is totally fair to say that this year should be counted for two for everyone who remained working in the branch – given the amount of problems, challenges and changes they faced.

Nearly fourfold market fall (-74% over the 8 months of 2009 vs. 8 months of 2008) is all but the biggest in the world: at least, for relatively large countries, where annual sales run into hundred thousands. However, if we take monthly sales (registrations) of new vehicles, it is obvious (figure 1) that the decline has stopped and the market has reached this very bottom that was so important, but so hard to predict. Now we know that the bottom for the Ukrainian market of passenger cars means about 14,000 units per month, which is equal to approximately 170,000 units per year. So the forecast we made six months ago (180,000 units in 2009) has proved out, given that in January we got about 10,000 registrations from December 2008 (this actually makes January the best month in 2009, which is very untypical). And altogether, monthly figures of 2009 are not in line with normal seasonal peaks and falls that were typical for earlier years.

The reasons are well-known – the consumer ignores the calendar and reacts only to discounts. The problem is that importers and dealers still have a large stock of vehicles that were imported at the ‘old’ import duty and excise rates, and, most importantly, at the old hryvnia rate - so even when they give substantial discounts, such companies still have positive financial result, if we count it in hryvnias. On the other hand, car sellers do not have much choice other than dumping and selling cars at much lower prices that they ‘have’ to be based on today’s currency rates, as the small market does not have enough room for everyone. So, to avoid selling 2008 cars (which are still numerous in stocks) in 2010, and considering that after the lift of extra 13% duty from September 7 they can go ahead importing ‘fresh’ cars, some of our industry fellows offer serious concessions to consumers, cutting their prices by 15% and more.

But our Company, as always, pursues its own way, which is actually far from the worst: having sold most last-year vehicles in the first year-half, and having succeeded in negotiations with Ford on redistributing our orders to other European markets, we currently possess one of the smallest stocks (figure 2,3). It enables us to timely import new models that are in biggest demand, under the new customs clearance conditions. Moreover, as we are actually placing orders with our manufacturers, we can expect them to offer incentive programs. For this we have to pay with our sales level, which is considerably lower if compared to January-April 2009.

The last third of the year will be crucial for defining our ultimate market share in 2009, with which we will start the next year. We have a range of new products – the Ford Fiesta, ‘automatic’ petrol Ford Kuga, Porsche Panamera, restyled Range Rover, Range Rover Sport and Discovery, and this gives us confidence that we will be able to bring our sales back to life and show growth in 2010. Preliminary forecast for the market is 200,000 vehicles.

The next year will also be hard, but let’s hope that this time it will be counted for a year and a half.