The FINANCIAL — The leading importer of used cars in Georgia Caucasus Auto Import (CAI) says that in the last two months prices have been cut by 15-20%. The tendency for falling demand on cars has accelerated. From August the sales of used car importers dropped by nearly 50%.
According to MyAuto.ge, one of the biggest used car web auto portals in Georgia, the average prices for the three most popular brands; BMW, Mercedes and VW have decreased by 0.46%, 9.07% and 3.54% respectively. These price changes were calculated by taking June prices as a base average. The average prices were USD 12,033 for BMW, USD 10,974 for Mercedes and USD 6,979 for VW.
Despite the fact that the GEL devaluated by 0.16 against the USD two weeks ago Georgian importers didn’t seem to be worrying.
“We buy and sell in USD. For this reason the GEL’s devaluation against the USD didn’t influence our operations. 80% of our imports are from the USA, 10% are from Germany and 10% from Japan. From September our sales dropped by nearly 45-50%,” Caucasus Auto Import, told The FINANCIAL.
The Association of Oil Product Importers and Distributors (NIA) reports that nowadays there are 546,999 (452,793 light-duty vehicles, 40,688 buses, 53,518 trucks) cars registered in Georgia. 260,501 cars expired by 1990 and 286,498 expired after the year 1990. Among the light-duty vehicles, according to NIA there are 36,440 Mercedes-Benz’s, 25,582 Volkswagens and 22,629 Fords, BMWs – 24,995 and 51,573 Opels registered in Georgia up to this date.
Ukraine is one of Georgia’s closest allies in facing the same auto crisis.
The All-Ukrainian Association of Car Importers and Dealers claims that sales of foreign cars in Ukraine fell by 4 times in the first part of November compared to the first part of October 2008.
Sales fell due to the reduction of consumer crediting by 5-6 times and the growth of currency exchange rates, which, in its turn, increased prices on imported cars in the national currency. The Association forecasts that in results of the year 2008, foreign car sales in Ukraine will make almost 600 thousand cars, and for the results of the year 2009 – 380-400 thousand cars.
Meanwhile the auto credit crisis is accelerating in the USA too. The credit crisis has hit the car makers at the worst possible time as they seek to cut costs, reduce headcounts, and switch their manufacturing from gargantuan body-on-frame trucks and SUVs to smaller, European-style saloons and hatchbacks. They’ve also been saddled with a huge legacy of paying for pensions and healthcare for their retired workers, estimated to add as much as USD 2,000 to the price of each new car.
According to The New York Times the major automakers – G.M., Ford and Chrysler – are each using up their cash at unsustainable rates. The Centre for Automotive Research, which is based in Michigan and supported by the industry, released an economic analysis of the impact of one or all of them failing. If the Big Three were to collapse, it said, that would cost at least three million jobs, counting autoworkers, suppliers and other businesses dependent on the companies, down to the hot-dog vendors and bartenders next door to their plants.
The chief executive of General Motors, Richard Wagoner, told the House Financial Services Committee on Wednesday that the recent plunge in auto sales is threatening the survival of his company.
The heads of the three U.S. automakers continued their plea for USD 25 billion in emergency government aid. The Bush administration and many Republican lawmakers oppose using the USD 700 billion financial rescue programme to aid automakers. The executives say if even one of the automakers goes out of business, the consequences could be catastrophic, with millions of American jobs lost.
“As we know demand for used cars has significantly decreased. Because of the increased risk factor, demand is very low so sellers are just trying to sell their cars as soon as possible,” explained Aroshidze, Head of the Marketing Department, Iberia Business Group (IBG).
IBG is selling cars of the largest world producers on the Georgian market. The company was established in 1999.
IBG sold at least 120 cars during the conflict in Georgia. About 90 cars were corporate and 30 cars went to private clients. Approximately 55% were Skoda, 15% Kia, 12% Mitsubishi and 18% other brands (Renault, Peugeot, VW, and Audi). Total value of the cars sold came to approximately USD 1,500,000.
“From last year’s sales the most popular types of used cars in Georgia are Sedans, Jeeps, Hedge Backs and Coupes,” said a company representative.
“Since September IBG has sold about 280 cars. Despite the price change on fuel, car sales remained unchanged. Some car suppliers have increased prices on new autos, but still we are trying to keep pricing strategy as usual. So we can say that during this period our prices did not change,” Levan Aroshidze , told The FINANCIAL.
Toyota Georgia, said that the prices on its cars have not changed.
Toyota had a special charity campaign with discounts for the month of October. Out of the different car dealerships in Georgia Toyota was one of the best according to last year’s figures. It was the Golden Brand winner in Georgia in 2007.
The sales of Toyota cars increased fourfold over the last two years, before the war started.
“Some Georgian dealers raised their prices on new cars. The reason is simple; they get cars from manufacturers for a much higher price. Iberia business group is trying not to raise prices on new cars, brands such as Renault and Peugeot are much cheaper to buy now,” added Aroshidze.
“In Georgia the most popular brands are VW, MITSUBISHI, KIA, HYUNDAI, TOYOTA and Nissan. The reason is simple; generally the attitude towards Japanese brands is very positive in Georgia. As for the Volkswagen, it is one of the most popular brands in Georgia as in the rest of the world for its high quality, brand loyalty and good pricing strategy,” commented the IBG representative.
Written By Levan Lomtadze