Toyota leads sales hike in Ukraine ahead of war tax

During the first half of 2024, Ukraine imported 32,800 finished vehicles, 21% more than the previous year, the Ukrainian automotive industry association Ukravtoprom calculated.

In 2023, Ukraine imported 60,682 finished vehicles, 60% up from the previous year, when automotive imports to the country were nearly paralysed by the hostilities. In value, imports reached UAH 105 billion ($2.54 billion).

By contrast, in July 2024, over 6,400 finished vehicles were registered in the country – the highest monthly figure since the Russian troops crossed the Ukrainian border.

Toyota remains the leader of the Ukrainian market, with 1,024 finished vehicles registered in July, followed by BMW with 629 and Renault with 587 finished vehicles, Ukravtoprom reported.

During the first seven months, Ukraine imported 228,319 vehicles, with the lion’s share of that volume being used cars. In this segment, the leadership belongs to Volkswagen with 25,498 units delivered to the country. Renault ranks second with 17,479, and Audi is third with 13,173 cars.

The war has tremendously changed inbound logistics. In previous years, most finished vehicles and used cars were delivered to Ukraine by sea to the ports of Odesa and Kherson. However, a sea blockade imposed by the Russian navy in 2022 forced importers to switch to automotive carriers.

Over 60% of finished vehicles and used cars are delivered to Ukraine from the European Union, with around 30% coming from North America, the Ukrainian Institute of Automotive Market Support calculated. [Continues below table]

Looming war tax
The July hike in sales is largely attributed to the government initiative to subject new car sales to a 15% war tax from September 1.

As estimated by Oleg Nazarenko, general director of the All-Ukrainian Association of Automotive Importers and Dealers, in a matter of two days since the initiative was announced in mid-July, Ukrainians purchased all finished vehicles available at local dealerships.

“Car dealerships are empty. Customers flocked to buy the finished vehicles to avoid paying the new tax,” Nazarenko wrote in a statement on his Facebook page.

In general, Nazarenko criticised the government initiative, assuming it could put finished vehicle sales and imports on halt.

“Instead of filling the budget, the state will face a drop [in taxes],” Nazarenko claimed, reminding that under the existing regulations, finished vehicle sales are already subjected to a 5% fee paid to the state Pension Fund. “The excessive burden of 20% is huge – it will take much time for customers to get accustomed to it.”

The government plan to impose a 15% tax on finished vehicle sales could drive the automotive market to a collapse, said Oleg Omelnytskyi, director of Auto-Consulting, a Kyiv-based think tank.

Coupled with the devaluation of Ukraine’s hryvnia, the military tax will tremendously undermine the purchasing power of the Ukrainian population.

“You can forget about the market recovery. The very existence of dealerships of certain brands will be put into question,” Omelnytskyi admitted.

Small dealerships with moderate sales will have to fight for their survival, especially in the “difficult regions” close to the frontline where the number of potential buyers is already scarce, Omelnytskyi warned.

Omelnytskyi speculated that customers will switch en masse to used cars already registered in Ukraine because they are not subject to the new tax.

However, the war tax bill has yet to be passed by Verkhovna Rada, the Ukrainian Parliament, to be signed into law.