The FINANCIAL - Georgian Auto Re-export Experiencing Massive Dive

Georgian Auto Re-export Experiencing Massive Dive

Georgian Auto Re-export Experiencing Massive Dive

Despite the dramatic reduction in re-export of vehicles, the total number of cars imported in Georgia increased by 14% during the first five months of 2015, in comparison with the prior-year period. With over 50%, Japan is the top country in terms of cars exported to Georgia. It is followed by the U.S. and Germany. Re-export of vehicles dropped by 70% this year. Georgian dealers have essentially lost Azerbaijan as a market since the country implemented Euro-4 standards. In addition, auto dealers are currently facing the imminent loss of Armenia, which decided to join the Eurasian Customs Union, backed by Russia.

In total, 40,048 units of vehicles (worth USD 216,649,400) were imported to Georgia from January-May 2015. The number was 35,147 (or USD 262,064,400) during the same period of the previous year. Annual data comparison has shown a 14% increase.

With 20,545 units, Japan is the top country from which the largest number of vehicles is imported in Georgia. It is followed by the U.S. - with 9,013 units, and Germany - 6,837.

Georgian auto dealers managed to re-export just 6,861 units (worth USD 85,080,700) this year. The figure was 23,510 units (valued at USD 236,280,400) in January-May 2014. With 3,743 units, Armenia remains the top country in terms of re-exported cars from Georgia. It is followed by Azerbaijan, with 1,959 units. Georgia’s re-export to neighbouring Armenia was 11,192 units last year, while Azerbaijan counted 10,621 cars for that time.

The dramatic reduction of automobile sales in Azerbaijan from Georgia started in 2014. The Azerbaijani Government has now banned the import of cars that use fuel of a standard below Euro-4, consequently the export from Georgia to Azerbaijan of vehicles produced before 2005 (which used to be in the highest demand) has completely stopped.

According to the Director of the export trading company “Zario Auto” Joseph Zarandia, after the introduction of the new regulations, the export of Japanese cars to Azerbaijan has virtually stopped, and dealers have basically switched to American cars.

Previously, Japanese cars made up a very large share of those exported to Azerbaijan, while now preference is given to American vehicles produced since 2005. Exports fell in July 2014. Of course, we cannot say that Azerbaijan, as a country importing cars, is completely lost as an export market for Georgia, but the number of cheap cars that could be bought in Georgia is reduced and expensive cars can be purchased in showrooms in Azerbaijan. It was very profitable to sell Japanese cars, as they have always been of high quality, in very good condition, with low mileage, and the Azeris bought them gladly. If you look at our company’s structure of exporting cars, 60-65% of the cars were Japanese, and 35-40% - American,” said the dealer.

According to him, due to the current situation in the market, many dealers have ceased operations altogether.

While the loss of the Azerbaijani market has resulted from the country’s will to enhance standards, in the case of Armenia the reason was its political will to join the Eurasian Customs Union.

In 2015 Armenia became a fully-fledged member of the Russian-led Eurasian Customs Union (ECU). Georgia, on the other hand, signed the Association Agreement (AA) and the Deep and Comprehensive Free Trade Area Agreement (DCFTA) with the European Union. New regional divergence, and two different choices that have been made in the same region, have impacted on the trade relations between the two countries.

In 2013 automobiles were the largest re-export product from Georgia to Armenia. Approximately USD 120.5 million worth of automobiles went to Armenia, comprising 38 percent of total exports from Georgia. The new tariffs have affected not only bilateral trade and auto-dealers, but also the interests of Armenian consumers.

The situation with car re-exports from Georgia to Kazakhstan developed similarly after the latter joined the ECU. However, export to Kazakhstan was mostly low, with a huge jump in 2011 and equally rapid drop in the next year, whereas car exports to Armenia were characterized by very steady growth since 2009. Thus, in the case of Armenia, Georgian auto dealers are losing a bigger market.

The current year has been successful for AKA Mercedes-Benz Georgia. The company sold 99 units during January-June 2015, up from 65 units from the same period of the previous year. With 24 units, Mercedes GLA has been the bestselling brand of the company this year. The price of this model varies from EUR 28,000 to EUR 40,000.

“The sales increase at our company has been the result of the new models that we have offered. Reduction of the EUR towards the USD also contributed to our sales increase. The cost of cars denominated in USD has been reduced by 15-20%,” Lasha Lomidze, Sales Manager at AKA Mercedes-Benz Georgia, told The FINANCIAL.

According to Lomidze, since the GEL’s devaluation, prices of vehicles have been slightly reduced. “We have fees denominated in EUR, which devaluated against the USD,” said Lomidze.

“As of June we have seen a 52% sales increase. We expect to have a minimum 30% sales growth this year in comparison with the previous one,” Lomidze said.

The optimistic forecast of Lomidze is based on the results of the first six months, as well as a reduction of the EUR currency.

Toyota Center Tegeta sold 341 units during January-June 2015. With 150 units, Toyota Land Cruiser Prado has been the bestselling brand. The cost per unit varies from USD 32,995.

“With the support of the auto supplier Toyota Caucasus and Central Asia office we managed to revise our price policy this year. In addition, the company has offered various marketing activities to customers,” said George Kobakhidze, Sales Manager at Toyota Center Tegeta.

Like Lomidze at Mercedes-Benz, Kobakhidze is optimistic in terms of sales this year. “We expect to doubles sales in the second part of the year,” Kobakhidze told The FINANCIAL.

Toyota Center Tegeta has offered the RAV 4, with Turbo Diesel engine and Toyota Corolla models.Toyota Center Tegeta was established in Georgia in the second part of 2014. It is the second dealer offering Toyota brand cars to customers after Toyota Center Tbilisi.

 

 
Author: Madona Gasanova

Advertisement

Events