Three-quarters of surveyed participants in the Ukrainian automotive market consider the used car market non-transparent due to excessive bureaucratic red tape

25/ 09/ 2023

The main issue with the used car market in Ukraine is its lack of transparency, according to 74% of participants in the Ukrainian automotive market. Furthermore, nearly three-quarters of respondents attribute this lack of transparency to excessively bureaucratic procedures associated with the purchase of used cars for resale and the potential for shadowy schemes during the resale of used cars, which result in no tax revenue for the state budget. The primary measures that should be immediately taken at the state level to enhance transparency in this market include the abolishment of these bureaucratic procedures (as an alternative, the adoption of Draft Law No. 9083) - a position supported by almost 90% of market participants. These are the main findings of a survey conducted by the European Business Association among representatives of automotive importers and dealers operating in Ukraine. According to assessments from participants in the automotive market who took part in the European Business Associations survey, in 2022, the sales volumes of used cars exceeded new car sales by a factor of 16. The main reason for this, according to 72% of respondents, is the insufficient income of Ukrainians to purchase new cars, while 4% believe that Ukrainians generally prefer used cars. Meanwhile, 24% of respondents cited other reasons, including a shortage and limited assortment of new cars in 2022, the possibility of customs clearance of used cars at a zero rate, and increased demand for used cars for frontline needs. In total, 74% of respondents believe that the used car market lacks transparency, with 34% considering it completely non-transparent. Only 2% perceive it as transparent. Commenting on the current state of the used car market, experts highlight the use of shadow resale schemes for cars (both domestically purchased and imported), which do not undergo technical inspections. Such cars may be inexpensive but can pose risks to road users and the environment. Additionally, the state does not receive taxes from the resale of these vehicles. All of these factors distort competition in the market and place official operators at a disadvantage. Among the main reasons that make the used car market non-transparent, survey participants highlight: Excessive Bureaucratic Procedures: There are numerous bureaucratic procedures associated with the official purchase of used cars for resale, including additional steps for re-registering a used car to the enterprise officially engaged in such resale, often at the Ministry of Internal Affairs service centers. This opinion is shared by 70% of respondents. Reluctance of Auto Businessmen to Pay Taxes: Many auto businessmen are reluctant to pay taxes on the resale of used cars and use shadowy schemes for their sale, where the transaction either appears as a commission sale or as the sale of a vehicle by an individual, which is not subject to taxation. This viewpoint is endorsed by 70% of respondents. Lobbying of Interests to Reduce Customs Tariffs and Taxes: There is lobbying of interests by concerned groups to either reduce or eliminate customs tariffs and taxes on the import of used cars into Ukraine. This perspective is supported by 62% of respondents. The situation is different for the new car market. 92% of survey participants consider it transparent, while only 4% view it as non-transparent. Commenting on the current state of the new car market, experts mention difficulties in forecasting production, delivery schedules, and specifications. However, market participants also point out that this state of official new car deliveries to Ukraine encourages gray imports of new cars, which predominantly do not comply with Ukraines certification requirements. Regarding the factors that hinder the operations of official companies in the used car market, 62% of experts agree that a significant factor is the prolonged sales procedure for used cars due to the numerous bureaucratic procedures associated with the official purchase and subsequent resale of used cars. At the same time, 32% attribute slightly higher prices compared to the shadow market to the official payment of taxes. To bring the used car market out of the shadow, according to official market players, the following immediate measures should be taken. Specifically, 87% of survey participants support the abolishment of unnecessary re-registration of used cars to the economic entity officially trading in used cars. Additionally, experts suggest reducing taxation on operations involving used cars and strengthening control over shadow schemes in this market. For reference: The survey was conducted by the European Business Association from July 12 to August 11, 2023. The survey involved 53 representatives of automotive importers and dealer centers operating in the Ukrainian market. Of the survey participants, 81% have a company or division engaged in the sale of used cars.

The primary measures that should be immediately taken at the state level to enhance transparency in this market include the abolishment of these bureaucratic procedures (as an alternative, the adoption of Draft Law No. 9083) – a position supported by almost 90% of market participants. These are the main findings of a survey conducted by the European Business Association among representatives of automotive importers and dealers operating in Ukraine.

According to assessments from participants in the automotive market who took part in the European Business Association’s survey, in 2022, the sales volumes of used cars exceeded new car sales by a factor of 16. The main reason for this, according to 72% of respondents, is the insufficient income of Ukrainians to purchase new cars, while 4% believe that Ukrainians generally prefer used cars.

Meanwhile, 24% of respondents cited other reasons, including a shortage and limited assortment of new cars in 2022, the possibility of customs clearance of used cars at a zero rate, and increased demand for used cars for frontline needs.

In total, 74% of respondents believe that the used car market lacks transparency, with 34% considering it completely non-transparent. Only 2% perceive it as transparent. Commenting on the current state of the used car market, experts highlight the use of shadow resale schemes for cars (both domestically purchased and imported), which do not undergo technical inspections. Such cars may be inexpensive but can pose risks to road users and the environment. Additionally, the state does not receive taxes from the resale of these vehicles. All of these factors distort competition in the market and place official operators at a disadvantage.

Among the main reasons that make the used car market non-transparent, survey participants highlight:

Excessive Bureaucratic Procedures: There are numerous bureaucratic procedures associated with the official purchase of used cars for resale, including additional steps for re-registering a used car to the enterprise officially engaged in such resale, often at the Ministry of Internal Affairs service centers. This opinion is shared by 70% of respondents.
Reluctance of “Auto Businessmen” to Pay Taxes: Many “auto businessmen” are reluctant to pay taxes on the resale of used cars and use shadowy “schemes” for their sale, where the transaction either appears as a commission sale or as the sale of a vehicle by an individual, which is not subject to taxation. This viewpoint is endorsed by 70% of respondents.
Lobbying of Interests to Reduce Customs Tariffs and Taxes: There is lobbying of interests by concerned groups to either reduce or eliminate customs tariffs and taxes on the import of used cars into Ukraine. This perspective is supported by 62% of respondents.

The situation is different for the new car market. 92% of survey participants consider it transparent, while only 4% view it as non-transparent. Commenting on the current state of the new car market, experts mention difficulties in forecasting production, delivery schedules, and specifications. However, market participants also point out that this state of official new car deliveries to Ukraine encourages “gray” imports of new cars, which predominantly do not comply with Ukraine’s certification requirements.

Regarding the factors that hinder the operations of official companies in the used car market, 62% of experts agree that a significant factor is the prolonged sales procedure for used cars due to the numerous bureaucratic procedures associated with the official purchase and subsequent resale of used cars. At the same time, 32% attribute slightly higher prices compared to the “shadow” market to the official payment of taxes.

To bring the used car market out of the shadow, according to official market players, the following immediate measures should be taken. Specifically, 87% of survey participants support the abolishment of unnecessary re-registration of used cars to the economic entity officially trading in used cars. Additionally, experts suggest reducing taxation on operations involving used cars and strengthening control over shadow schemes in this market.

For reference:

The survey was conducted by the European Business Association from July 12 to August 11, 2023. The survey involved 53 representatives of automotive importers and dealer centers operating in the Ukrainian market. Of the survey participants, 81% have a company or division engaged in the sale of used cars.