Here are three main points that adversely affect prices and purchasing power:
1) the economic and political situation in Ukraine;
2) the fall of the hryvnia by almost 50%;
3) the state of "deferred demand" caused by the increase in taxes on car imports by the previous government.
Regarding the first two factors, making any forecasts is quite problematic. This can only be done after the stabilization of the political situation in the country.
But the third factor is more or less predictable. Therefore, we turn to the forecasts of the All-Ukrainian Association of Automobile Importers and Dealers:
In April 2014, three of the most important pricing taxes were changed at once – excise duty, special duty, and recycling fee, which will naturally affect the price of cars.
Deputies of the Ukrainian parliament supported by their votes the adoption of the Law "On Preventing Financial Catastrophe and Creating Prerequisites for Economic Growth in Ukraine", under number 4576. According to this law, from April 1, the excise duty on imported passenger cars brought into the territory of Ukraine is doubled.
According to the decision of the Interdepartmental Commission, from April 15, special duties on foreign cars imported into Ukraine were reduced by a third. Moreover, in a year we will see another reduction by a third of the amount of this fee.
On April 8, under public pressure, deputies of the Verkhovna Rada nevertheless adopted Law No. 4238 "On Amendments to the Tax Code of Ukraine (regarding the abolition of the recycling fee and excise tax on vehicle conversion)", according to the norms of which the recycling fee is completely abolished.
Forecast of the All-Ukrainian Association of Automobile Importers and Dealers regarding car imports in 2014:
Due to the sharp doubling of excise duty rates on gasoline cars with engine displacement from 3000 cm³ and diesel cars with engine displacement from 2500 cm³, the import of such cars will significantly decrease (presumably a drop of 80-90%); due to the 30% reduction in special duty rates on gasoline cars with engine displacement from 1000 to 2200 cm³, the import of such cars will become more active (relatively);
mainly gasoline cars with engine displacement up to 3000 cm³ inclusive and diesel cars with engine displacement up to 2500 cm³ inclusive will be imported (up to 95% of the total import volume);
there will be a further shift in car imports towards the popularity of "budget", inexpensive trim levels of cars;
in the event that the authorities do not take measures to stabilize the hryvnia exchange rate and stop its devaluation, a complete cessation of car imports and the shutdown of Ukrainian car assembly plants is possible.
At the same time, without eliminating the first two factors, and especially without stabilizing the political situation in Ukraine and without developing the economy, the Ukrainian car market will continue its decline, the All-Ukrainian Association of Automobile Importers and Dealers believes.
