Ukraine used to be the third-largest passenger car market in Central and Eastern Europe (643,000 units sold in 2008) after Russia and Poland. Because of the country’s economic recessions in 2009 and 2014, the market for new cars contracted by 92 percent and plummeted to 47 000 units in 2015. The recovery began in 2016. As a result, in 2017, 80 271 new vehicles were sold, reaching a record high since 2014. In 2018, the sales of new cars dropped by 2.35 percent at 78,387 units as a result of a temporary tax incentive for used car imports introduced by the Government of Ukraine in 2016. As a result, used car sales surpassed new cars sales, reaching a record high of 116,800 vehicles in 2018.
Summary
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Market Entry & Barriers
Importing a car to Ukraine is set to become more affordable in 2019 due to a new customs law. Effective January 1, 2019, Ukraine lowered the import excise rate on all new and used petroleum, diesel, and electric car imports. In November 2018, the Ukrainian Parliament abolished a temporary tax incentive for used cars and reduced custom fees for imported vehicles. The new law № 8487 introduced a new excise tax formula for new and used cars imported to Ukraine. It is expected that the car prices will drop in the first quarter of 2019. According to experts’ opinion, however, the price reductions will be essential only for premium and high engine capacity vehicles.
On August 1, 2017, the Canada-Ukraine Free Trade Agreement entered into effect. According to this agreement, the used high capacity engine cars (petroleum 2.2 – 3 liters and diesel – 2.5 liters and higher) manufactured in Canada can be imported to Ukraine with no excise tax. The Free Trade agreement states that in seven years all types of cars manufactured in Canada and imported to Ukraine will be excise tax exempt.
U.S. companies interested in expanding to the Ukrainian market should identify a local partner for effective marketing and sales distribution. This could be done via an established distributor with complementary product lines or a joint venture partner for joint distribution. In any case, due diligence on a potential local partner is highly recommended.
There are no restrictions on the import of passenger cars and parts from the United States. Due to Ukraine’s Deep and Comprehensive Free Trade Agreement (DCFTA) with the European Union (EU), U.S. exporters will need to meet EU regulations and be certified accordingly. Customs duties for automotive parts and accessories imported from abroad are ten percent. The value-added tax (VAT) for automobiles in Ukraine is 20 percent and is applied to all imports. Also, there is an excise tax based on a car’s engine capacity, and age, as well as a base tariff. Trade restrictions or other non-tariff barriers (such as quotas) do not exist.
Ukraine