Buckle Up For The Talk Regarding Car Distribution In Georgia

The FINANCIAL -- Only a few years ago the enormous majority of potential car buyers visited several dealers for decision-making. Currently, consumers make use of diverse information sources and sales channels before even considering a transaction closure. In other words, when entering a dealership for the first time, most clients already have a well-thought-through idea about the deal they are looking for. Are Georgian buyers any different? To find out more about the drifts, Experto has approached most industry players of all sizes with exclusive and non-exclusive car distribution rights.

Before revealing the findings of our qualitative research, let us look at the latest official statistics the Ministry of Internal Affairs of Georgia has released earlier this year regarding the “car park” situation in Georgia. We have generated a graph that shows the total number of vehicles per year together with an indicated growth rate compared to previous year. There is a clearly visible trend that the number of vehicles in Georgia is steadily increasing every year. For example, the growth rate in 2015 compared to the previous year was 8.14% but if you compare the same indicator to the 2011 data, the growth rate reaches staggering 38.89%.

If we take into account that the population of Georgia as of January 1, 2016 was 3,720.4 thousand people, that translates into the fact that every 3.56th person in Georgia “owned” a car at the beginning of the year. The official 2016 data shall be released in several months but even now we can already say that the growth trend of the number of vehicles in Georgia shall be maintained. 

What is really bothersome, however, is that the absolute minority of vehicles are under 3 years old – only 1.4%. Even more so, 90.9% of vehicles have been manufactured over 10 years ago, half of which are over 20 years old. 

Just to remind the reader, in 2014 Azerbaijan banned the import of old cars: from then on, only cars that meet the “Euro-4” ecological standard and were manufactured in 2005 or later are allowed into the country. This had a major impact on the number of vehicle export/re-export from Georgia, which came down by 59% in 2015 compared to year 2014. 

With the background more or less set, we can now dive into presenting to the readers several key players in the car distribution sector in Georgia. 

Caucasus Auto Import, founded in 2004 by Georgian and American partners, has been the market leader for the past decade. The Company offers dealers, organizations, and private citizens the opportunity to purchase automobiles from the US, Europe, and Japan. Since its inception, they have imported and sold more than 40,000 cars in the Caucasus region. Caucasus Auto has a wide network of branches throughout Georgia, as well as in Azerbaijan, Armenia, Kyrgyzstan, and the North Caucasus. According to the CEO, Mr. George Supatashvili, one of the main distinctive features of Caucasus Auto Import is that they offer the auto leasing service allowing the consumer to buy a car from the US with only 20% down payment, with the remaining being paid back to the company over a 5-year period. “Today, the used cars market is very competitive in Georgia and players offer to consumers a wide range of vehicles, but unfortunately there is no relevant state regulation of the automotive market that can protect the utmost rights of consumers. The introduction of the "Euro-4" standard is vital”, stated Mr. Supatashvili. Deriving from the market demand the company offers both left and right hand drive cars to its consumers: “…but from my personal point of view, the import of right-hand-drive vehicles should already be restricted in Georgia because the significant increase of such cars in this country could eventually lead to undesirable changes of road and driving rules in Georgia.” As a matter of fact, in 2015 Georgia imported 60.3% of left-hand-drive cars and 39.7% of right-hand drive cars. The ratio in 2011 was 90.4% to 9.6%. 

Moving on to our second respondent SENA AUTO GROUP, established in 2006, is the official dealer of HONDA MOTOR CO, also operating a certified service center. The Group became the official distributor of JAC Motors for Georgia and Armenia in 2015, providing a full range of passenger and commercial automobiles and electric vehicles. Ms. Anna Tsereteli, Marketing Manager of the Group told Experto that they also operate a separate Multiband Service Center for Government Tenders. She also underlined the fact that they distribute new automobiles with steering wheels on the left side, elaborating that “Georgia needs a clear government regulation for automobiles imported in Georgia with right-side wheel, as 90% of those cars are older than 10 years. Most of them don’t work properly, they are not fit for safe driving and they pollute the environment”. Moreover, “in 2016 we have established a special TAXI Service with new automobiles mainly for Government representatives and Tourists”.  Ms. Tsereteli believes that in Georgia opportunities for growth exist for all car distributors that carry high quality vehicles: “but if the government implements a stricter regulation on Emission standard and on right-hand-drive vehicles, quality car distributors will have even more opportunities to develop”.

Ms. Ketevan Khuntsaria, Commercial Director of Tegeta Premium Vehicles, Daughter Company of Tegeta Motors believes the contrary “Car Market is already saturated, top brands have already been represented on the market for over a decade. Nevertheless, there could be found room for luxury sport brands, but for this moment the Georgian market is not quite ready.” Tegeta Premium Vehicles became the official importer of Porsche in Georgia according to an exclusive agreement which was signed in 2011: “Our Company offers a full model range of brand new Porsche Models. After opening the Porsche-standard showroom our main aim has become to meet Porsche standards in sales, service and spare parts as well”, explained Ms. Khuntsaria. Tegeta Premium Vehicles distributes vehicles with left side steering wheels only, according to country road standards: “Our roads are customized for left side steering wheel vehicles. So, to avoid possible accident situations, and meet regulations of passenger safety, it should be mandatory to leave only left side steering wheel vehicles on the Georgian roads. Based on October 2016 data there were 1,176,000 vehicles registered in Georgia, out of which, about 900,000 are passenger cars and only 9.5% are less than 10 years old”, concluded with concern the Tegeta Premium Vehicles representative. 

Iberia Business Group (IBG) also offers only left hand drive vehicles. Ms. Ia Modebadze, Head of Marketing Department of the Group told Experto that IBG, established in 1999, currently is the biggest automotive holding on the Georgian market: “we are the official and only representative of Volkswagen, Audi, Skoda Auto, Seat, Kia Motors, Mitsubishi Motors, Renault, Peugeot cars in Georgia”. A few years ago Iberia Business Group entered the used car market as well. Moreover, the holding owns a football club Saburtalo and is the official representative of the German sports brand Saller. According to Ms. Modebadze, IBG was the first player to offer auto loan with Bank of Georgia, auto leasing with TBC Bank, as well as give customers an opportunity to replace old cars with new ones with the trade-in-program.

Speaking of trade-in-programs, Mr. George Paliani, Project Manager at IMEDI SAS told Experto that: “We were among the pioneers to offer a trade-in program that frees the consumers from the hassle of selling their existing vehicle. To increase the affordability of our product to the wide array of consumers, we offer low interest loans, affordable service rates and very durable automobiles that are specially adapted to the Georgian climate and road conditions. We also try to stay on the cutting edge of technology and offer novelty experience to our consumers, Virtual Reality Test Drive being one of them”. Companies within their group carry exclusive agreements with Renault and Peugeot and distribute left-side steering wheel vehicles only – “We do not oppose having vehicles with right steering wheel on Georgian roads as long as they do not compromise safety and comfort of the user and other drivers as well”, further elaborated Mr. Paliani.

Both the growth and development of consumer market for automobiles make Georgia a very interesting and lucrative place among other developing markets according to the IMEDI SAS representative: “Consumer mentality is shifting from the used vehicle culture towards new vehicles, more so on the corporate market. This, combined with ease of doing business and unequivocal support for competitiveness from our suppliers, makes Georgia a very attractive place for our business”, concluded George.

On our end we would add that even in the future, branded dealerships will have a key role when it comes to customer care and maintenance of a proper emotional connection between a consumer and any given brand. After all, it is in the hand of retailers to establish the basis for sustainable brand loyalty.


Author: Keti Sidamonidze and Ludovig Girod, EXPERTO CONSULTING