Ukrainian machine-building, automobile and related industry
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Ukrainian machine-building, automobile and related industry (market overview)
Ukrainian machine-building industry was very successful last year. Production capacity of machine-building enterprises raised by 12% and total value of sold products amounted around $ 12 billion. Almost half of production ($6 billion) related to manufacture of transport; ($ 3,9 billion) to machine and equipment production; more than $ 2,1 billion – production of electric and electronic equipment.
Manufacture of motor transport became a driving force of machine-building, where growth rate turned out record comparing to last year and rose by 36%. This trend may be explained by increased demand for cars in Ukraine (owing to the growth of citizens` prosperity), and also by active work of Ukrainian banks in the sphere of auto crediting.
Significant growth was also determined by production of metallurgy machinery (18%), because of continuous modernization process in Ukrainian ferrous metallurgy and its close neighbours (mainly Russia). Besides, production of control equipment rose by 28%, electric machines – 11.6% and was caused by increase in activity of the businesses consuming these products.
In general, growth rates in machine-building industry were expected to be significantly higher, if there was no production decrease in the most problematic spheres of domestic machine-building industry, mainly in agriculture machinery manufacture (decline by 17.1%). In this field experts underline existence of old problem – a low-quality and old-style production at morally and physically outmoded facilities. It gives possibilities for foreign analogues to compete. Makers of cutting tools also experience considerable difficulties now, reducing their manufacture by 10% due to the same problem, as well as producers of radio and television equipment, reducing volumes by 7%. In 2008, growth rates in machine-building sphere amounted to about 20%, and there are no preconditions for the change of this tendency. The most considerable growth is demonstrated by the same leaders – motor transport producers (49.5%) and control equipment producers (39.5%). It also includes equipment manufacturers for extractive industry & building (39.2%), as well as railway machine-building enterprises (28.5%). If such positive trends and total modernization will be followed by machine-building enterprises, the Ministry of Industrial Policy of Ukraine estimates that in the near future the annual volume of machine-building production in Ukraine will exceed $ 100 billion.
Ukrainian automobile market has been growing rapidly for several years and has become one of the most promising markets in Europe. It is estimated that around 750,000 cars are being used in Ukraine and experts assert that this number will likely increase two and half times by 2010. While car markets in developed countries have stagnated, Ukrainians are buying 20-30% more new cars each year. Market saturation is not an issue, as there are only about 120 cars per thousand people in Ukraine, compared to 160 cars per thousand in Russia. Considering previous years’ results, the development of the automotive industry in Ukraine is encouraging. Experts forecast that Ukraine’s car production will continue to grow, although growth rates may slow somewhat because of saturation in some segments of the domestic market and unfavourable fuel market. Future growth will also be affected by the fact that automobile imports to Ukraine are far ahead of export supplies.
Key stakeholders. Automobiles are produced by the following companies: cars by Zaporozhye Automobile Plant (ZAZ); specialized cross-country automobiles by Lutsk Automobile Plant (LuAZ); buses by Lvov Bus Plant (LAZ); and trucks by Kremenchug Automobile Plant (KrAZ). In the 1990s, these companies realized that most vehicle models engineered in Ukraine were outdated and did not correspond to customer demand. Modernization at car making enterprises and re-orientation towards production of modern car models in the 1990s turned out to be less profitable than assembling cars from imported components. Economic preferences granted to importers of foreign car parts further contributed to the booming car assembling business. Dozens of enterprises arose that assembled cars from foreign parts, with an initial focus on large-unit assembling. The volume of automobile assembly and production is experiencing a rapid growth.
The largest Ukrainian car producer is ZAZ, which specializes in both assembling and manufacturing, which annually produces around 170,000 cars. The major part of the models is assembled from imported components. ZAZ has partnered with General Motors and its subsidiary GM-Daewoo to assemble cars under the Opel, Daewoo, and Chevrolet brands. There is high demand for inexpensive personal vehicles in Ukraine. One of ZAZ most recent projects was the signing of an agreement with Daimler-Chrysler to begin large-unit assembly of Mercedes-Benz cars at its production facilities in Ilyichivsk (Odesa region). Russian-made cars enjoy high traditional demand on the Ukrainian market, mainly because of their low price. UkrAUTO Corporation, which owns ZAZ, has begun the large-unit assembly of Dongfeng Chinese trucks at its facilities in Ilyichivsk. According to available data, already 17%-20% of sales of new commercial automobiles in Ukraine go to Chinese brands.
Eurocar is a Ukrainian enterprise supplied by Volkswagen Group with technological equipment, licensing documents and strict quality control. Through this project, a new automobile assembling enterprise was constructed in the Zakarpatye free economic zone for large-unit assembling of Skoda cars. Annual production capacity of this plant is around 15,000 cars. Eurocar plans to increase the percentage of Ukrainian components in its final product.
The production of trucks in Ukraine includes production itself and large-unit assembling. Most Ukrainian trucks are manufactured by an automobile industry giant – Kremenchug Automobile Plant (presently AutoKrAZ Holding Company). AutoKrAZ specializes in the engineering of heavy trucks, including cross-country and special trucks for the chassis of KrAZ vehicles (tank trucks, concrete mixers, drilling systems, cranes, etc). AutoKrAZ Holding is the largest exporter of motor vehicles in Ukraine and its vehicles had an excellent reputation for performance, especially in difficult climates (KrAZ vehicles have been shipped to Angola, Burma, Egypt, Sudan, Syria, Pakistan, and other countries). The company has also completed projects for the Latin American market.
The largest producer of small buses in Ukraine is Bogdan Corporation, which began manufacturing small city buses based on Isuzu engines and chassis back in 1999. Besides Bogdan, small bus assembly in Ukraine is also done by Borispol Auto Plant, Auto-Rus auto assembling plant of Kherson and several other enterprises.
Car Service. Due to the rapid development of the automotive market in Ukraine, car dealers are faced with a shortage of professional automotive service centres. Considering that by 2008 the number of cars used in Ukraine may increase by two and half, the automotive service segment becomes a significant issue for the industry. A problem for automotive dealers in Ukraine is in fulfilling their obligations to service cars under warranty. Some experts say that unless as much as $300 million is invested in the construction of service centres, many car dealers will collapse in a year. A recent research study revealed that as many as 20% of the customers of service centres are dissatisfied with the speed and quality of service and are considering switching to a new brand of car because of this.
Should you need any help on import or export of any product from/into Ukraine, feel free to contact us through our web site – www.kpl.net.ua. Our professional managers are always ready to assist you in this matter. Because we perfectly know Ukrainian market, we can save you a great deal of time and money, help you to make right decision and prevent fraud.
Author: Sergiy Polovenko, Oleksandr Tereshchenko
Copyright. BISNIS & Marketplace UkrRos LLC.
Ukrainian machine-building industry was very successful last year. Production capacity of machine-building enterprises raised by 12% and total value of sold products amounted around $ 12 billion. Almost half of production ($6 billion) related to manufacture of transport; ($ 3,9 billion) to machine and equipment production; more than $ 2,1 billion – production of electric and electronic equipment.
Manufacture of motor transport became a driving force of machine-building, where growth rate turned out record comparing to last year and rose by 36%. This trend may be explained by increased demand for cars in Ukraine (owing to the growth of citizens` prosperity), and also by active work of Ukrainian banks in the sphere of auto crediting.
Significant growth was also determined by production of metallurgy machinery (18%), because of continuous modernization process in Ukrainian ferrous metallurgy and its close neighbours (mainly Russia). Besides, production of control equipment rose by 28%, electric machines – 11.6% and was caused by increase in activity of the businesses consuming these products.
In general, growth rates in machine-building industry were expected to be significantly higher, if there was no production decrease in the most problematic spheres of domestic machine-building industry, mainly in agriculture machinery manufacture (decline by 17.1%). In this field experts underline existence of old problem – a low-quality and old-style production at morally and physically outmoded facilities. It gives possibilities for foreign analogues to compete. Makers of cutting tools also experience considerable difficulties now, reducing their manufacture by 10% due to the same problem, as well as producers of radio and television equipment, reducing volumes by 7%. In 2008, growth rates in machine-building sphere amounted to about 20%, and there are no preconditions for the change of this tendency. The most considerable growth is demonstrated by the same leaders – motor transport producers (49.5%) and control equipment producers (39.5%). It also includes equipment manufacturers for extractive industry & building (39.2%), as well as railway machine-building enterprises (28.5%). If such positive trends and total modernization will be followed by machine-building enterprises, the Ministry of Industrial Policy of Ukraine estimates that in the near future the annual volume of machine-building production in Ukraine will exceed $ 100 billion.
Ukrainian automobile market has been growing rapidly for several years and has become one of the most promising markets in Europe. It is estimated that around 750,000 cars are being used in Ukraine and experts assert that this number will likely increase two and half times by 2010. While car markets in developed countries have stagnated, Ukrainians are buying 20-30% more new cars each year. Market saturation is not an issue, as there are only about 120 cars per thousand people in Ukraine, compared to 160 cars per thousand in Russia. Considering previous years’ results, the development of the automotive industry in Ukraine is encouraging. Experts forecast that Ukraine’s car production will continue to grow, although growth rates may slow somewhat because of saturation in some segments of the domestic market and unfavourable fuel market. Future growth will also be affected by the fact that automobile imports to Ukraine are far ahead of export supplies.
Key stakeholders. Automobiles are produced by the following companies: cars by Zaporozhye Automobile Plant (ZAZ); specialized cross-country automobiles by Lutsk Automobile Plant (LuAZ); buses by Lvov Bus Plant (LAZ); and trucks by Kremenchug Automobile Plant (KrAZ). In the 1990s, these companies realized that most vehicle models engineered in Ukraine were outdated and did not correspond to customer demand. Modernization at car making enterprises and re-orientation towards production of modern car models in the 1990s turned out to be less profitable than assembling cars from imported components. Economic preferences granted to importers of foreign car parts further contributed to the booming car assembling business. Dozens of enterprises arose that assembled cars from foreign parts, with an initial focus on large-unit assembling. The volume of automobile assembly and production is experiencing a rapid growth.
The largest Ukrainian car producer is ZAZ, which specializes in both assembling and manufacturing, which annually produces around 170,000 cars. The major part of the models is assembled from imported components. ZAZ has partnered with General Motors and its subsidiary GM-Daewoo to assemble cars under the Opel, Daewoo, and Chevrolet brands. There is high demand for inexpensive personal vehicles in Ukraine. One of ZAZ most recent projects was the signing of an agreement with Daimler-Chrysler to begin large-unit assembly of Mercedes-Benz cars at its production facilities in Ilyichivsk (Odesa region). Russian-made cars enjoy high traditional demand on the Ukrainian market, mainly because of their low price. UkrAUTO Corporation, which owns ZAZ, has begun the large-unit assembly of Dongfeng Chinese trucks at its facilities in Ilyichivsk. According to available data, already 17%-20% of sales of new commercial automobiles in Ukraine go to Chinese brands.
Eurocar is a Ukrainian enterprise supplied by Volkswagen Group with technological equipment, licensing documents and strict quality control. Through this project, a new automobile assembling enterprise was constructed in the Zakarpatye free economic zone for large-unit assembling of Skoda cars. Annual production capacity of this plant is around 15,000 cars. Eurocar plans to increase the percentage of Ukrainian components in its final product.
The production of trucks in Ukraine includes production itself and large-unit assembling. Most Ukrainian trucks are manufactured by an automobile industry giant – Kremenchug Automobile Plant (presently AutoKrAZ Holding Company). AutoKrAZ specializes in the engineering of heavy trucks, including cross-country and special trucks for the chassis of KrAZ vehicles (tank trucks, concrete mixers, drilling systems, cranes, etc). AutoKrAZ Holding is the largest exporter of motor vehicles in Ukraine and its vehicles had an excellent reputation for performance, especially in difficult climates (KrAZ vehicles have been shipped to Angola, Burma, Egypt, Sudan, Syria, Pakistan, and other countries). The company has also completed projects for the Latin American market.
The largest producer of small buses in Ukraine is Bogdan Corporation, which began manufacturing small city buses based on Isuzu engines and chassis back in 1999. Besides Bogdan, small bus assembly in Ukraine is also done by Borispol Auto Plant, Auto-Rus auto assembling plant of Kherson and several other enterprises.
Car Service. Due to the rapid development of the automotive market in Ukraine, car dealers are faced with a shortage of professional automotive service centres. Considering that by 2008 the number of cars used in Ukraine may increase by two and half, the automotive service segment becomes a significant issue for the industry. A problem for automotive dealers in Ukraine is in fulfilling their obligations to service cars under warranty. Some experts say that unless as much as $300 million is invested in the construction of service centres, many car dealers will collapse in a year. A recent research study revealed that as many as 20% of the customers of service centres are dissatisfied with the speed and quality of service and are considering switching to a new brand of car because of this.
Should you need any help on import or export of any product from/into Ukraine, feel free to contact us through our web site – www.kpl.net.ua. Our professional managers are always ready to assist you in this matter. Because we perfectly know Ukrainian market, we can save you a great deal of time and money, help you to make right decision and prevent fraud.
Author: Sergiy Polovenko, Oleksandr Tereshchenko
Copyright. BISNIS & Marketplace UkrRos LLC.
01 Mar 2008 13:50
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