The parliament adopted a law abolishing the recycling tax on imported automobiles on April 8. According to the Ukrainian Association of Automobile Importers and Dealers (VAAID), this will revive the Ukrainian automobile market and launch the process of satisfying pent-up demand.
The association said in a press release that the average age of automobiles in Ukraine is 18.5 years and that demand for both new and used automobiles have fallen recently. Demand should now accelerate because many Ukrainians previously decided to hold into their money until normalization of the situation on the market.
At first, citizens expected the Association Agreement between Ukraine and the European Union to be signed in November 2013, believing that this would have liberalized the automobile market. Then, they prepared for abolition of the special duty on imported automobiles, which was stipulated in the new program of cooperation between Ukraine and Russia dated December 26.
"The law on abolition of the recycling tax (which will come into effect after it is signed by the President of Ukraine and from the moment of its publication, i.e. after 5-10 days) and reduction of the special duty on automobiles by 30% from April 14, 2014, which the parliament adopted on 8 April 2014, will definitely revive the Ukrainian automobile market and facilitate satisfaction of the population’s pent-up demand for automobiles,” VAAID said.
At the same time, the association said that the raising of the excise duty on passenger cars from 1 April 2014 will negatively affect sales and that even the cancellation of the recycling tax will not compensate for the increase in the prices of cars with engine capacities of more than 3,000 cubic meters in Ukraine.
For automobiles with smaller engine capacities (especially automobiles with engine capacities of up to 2,200 cubic centimeters), the cancellation of the recycling tax and the reduction of the special duty will be cheaper than customs clearance, which will allow dealers to offer automobiles to their customers on terms that are more favorable.
According to VAAID, the 10% import duty on automobiles will not be lowered (a minimum exists under WTO rules). Automobiles could become more expensive in hryvnia only because of the devaluation of the hryvnia, since other factors affecting prices have already stabilized.
"The price forecast: prices of automobiles with engine capacities of up to 1,500 cubic centimeters may fall by up to 8%, prices of automobiles with engine capacities of 1,501-2,200 cubic centimeters, inclusive, by up to 5%, and prices of those with engine capacities of 2,200-3,000 cubic centimeters, inclusive, by 3-4%. For automobiles with engine capacities of 3,001 cubic centimeters and above, prices may rise by at least 8%,” VAAID said in the press release.
