Ukraine auto production plummets, chemicals hit

Chemical producers in the Ukraine and exporters of polymers to the country's auto industry must be facing a devastating drop in demand according to new figures out today.

According to a new report by Companiesandmarkets.com, it is still suffering from the effects of the global recession, with signs of a recovery still few and far between in autumn-2009. New car sales fell 78% y-o-y to 15,760 in October 2009, a contraction of 17% from the previous month.

"With such figures being posted it is not yet clear whether the market has bottomed out. Oleh Nazarenko, the director general of the All-Ukrainian Association of Automobile Importers and Dealers (VAAID), estimates November sales will be roughly the same as October. However, the director general of Auto International (importer of Mazda Motor and Suzuki Motor), Olena Dunina, expects car sales to increase 10-15% in December.

We believe reports earlier in the year claiming the market had reached the bottom have proved optimistic, and serious downside risks remain. One problem in Q409 has been an influenza outbreak which has discouraged customers from visiting showrooms, although this will not be a long-term impediment to autos sales in the country. Industry insiders say the sector can grow in 2010 only if the right conditions are in place. Nazarenko has forecast that – with the current legal and taxation environment – new car sales will reach only 165,000-170,000 units, around the level that VAAID is expecting for 2009, or could even fall another 5% from 2009, which is likely to be a bad year itself.

Nazarenko is hopeful that an economic recovery and greater availability of consumer credit will help the market revive somewhat. He also expects car makers to offer credit at almost 0% interest with the aim of stimulating demand. If these schemes are successful, and there are no further legal and tax burdens put on dealers, Nazarenko estimates that sales could grow by 20-30%. However, this would still be from 2009’s very low base."