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The Top Trends in the Auto Industry for 2016

The year of 2016 turned out comparatively successful for automobile business compared to previous years. Sales indicators have grown, representatives of automobile companies noted.

At the same time, sales indicators of used cars were maintained, while there is less demand for new vehicles of authorized dealers. A new trend has also appeared – demand for electric cars grows. In this respect Toyota Prius hybrid automobile is very popular on the market.

Over the past years quantity of right-steering vehicles has increased considerably, as well as their sales.

The USA, Japan and Germany share leading positions among key suppliers of automobiles. 

Giorgi Supatashvili, director general for Caucasus Auto Import, explained that the year of 2016 recorded growing sales compared to previous years, but internal sales dropped because of national currency volatility.

“The problems started in November 2014, when USD started strengthening and GEL exchange rate dropped. Azerbaijan market was closed in practice, re-exports dropped almost to zero in 2015. Consequently, the state and business sector lost turnover with Armenia and Azerbaijan.

The year of 2016 recorded upturn in imports and internal sales. The diagram shows that exchange rate depreciation coincides with contraction in internal sales. Amid exchange rate volatility, sales also drop to minimum. However, when exchange rate is stabilized, sales also grow.

In whole, Japan-made vehicles hold a major ratio in total sales, as low-cost vehicles. Japanese vehicles exporter companies have made much profit from this business, in practice.

Vehicles importer companies had to bear losses in this case. Consequently, now we expect sales to decline in a short period before the market’s new configuration ends and the consumer realizes that acquisition of old automobiles will be carried out from only domestic market, while comparatively newer automobiles will be imported from abroad”, Supatashvili noted.

The director of Caucasus Auto Import noted that in 2016 the major demand was recorded for Toyota Prius hybrid vehicles. The current year recorded a great demand for hybrid automobiles on Georgian market, Supatashvili noted.

“Major demand was registered for Toyota Prius in 2016. This is a hybrid automobile. The decision that granted preferences for one-year automobiles and excise tax reduction by 50% have increased demand for these automobiles. The demand was high previously to and these additional preferences have further increased this demand. I can openly say that the year of 2016 was the period of growth in demand for hybrid automobiles”, Giorgi Supatashvili said.

Giorgi Kobakhidze, sales manager of Toyota Center, noted that, compared to other centers and factors, the company performed successfully in 2016 as a result of upturn in sales in 2015.

“Traditionally Toyota is a leader in sales. Compared to other centers and other external factors, in 2016 we have performed very well and we expect this year to close successfully.

We appeared on the market a short period ago, but we have fulfilled our ambitious plans. For example, we have recorded real upturn compared to 2015.

Solvency has changed because of USD exchange rate. If customs clearance tariffs grow, sales will be affected. Despite these factors, we hope anyway that in 2017 we will have growth», Kobakhidze said.

GT Motors founder Temur Ustiashvili has a different opinion. The market has not enlarged, he said.

The company sales have genuinely increased, but after the competitor company stopped operation, Ustiashvili added.

«In general, sales have increased compared to the previous year, but the market has not enlarged in itself. This signifies that some competitor companies have disappeared and that’s why our sales have increased. In general, imports of new automobiles have not increased, while imports of used cars are very high in Georgia. Imports of new cars make up only 2-3% in total imports. The last quarter has recorded contraction compared to the last quarter of the previous year», Ustiashvili noted.

Major demand is recorded for Ford vehicles in our company, he added.

The year of 2016 was less successful for Iberia Business Group, one of the leading companies on the market. Ia Modebadze, the company marketing department head, noted that in previous years sales were more stable.

Modebadze also talked about the bestseller brands in Iberia Business Group.

“In previous years sales were more stable. KIA Motors is the bestseller brand in our group, as it offers the best combination of quality, price and guarantee conditions. As to corporate sales, Czech Skoda is a very popular brand.

In general,  market of new automobiles in Georgia is very small, therefore, used cars offer serious competition to the business of new vehicles. As to exports, the year of 2016 was successful in this respect», Modebadze noted.

As to expectations for 2017, namely concerning excise tax growth on imported vehicles, Iberia Business Group representatives noted that this decision will not bring radical changes.

«As to expectations, the past years’ statistics shows that Georgian economy is quite instable and therefore it is difficult to talk about the 2017 expectations. Excise tax will grow and naturally, higher rates will reduce demand, however, the market of new automobiles is very small and specific. We do not expect excise tax growth to cause serious changes», Modebadze explained.

Shalva Ogbaidze, president of National Automobile Federation, talks about sales of used cars and demand for right-steering vehicles. Imports of hybrid vehicles have also increased, he said and positively appraised the fact.

“The previous year’s trend was maintained and deepened in 2016. This signifies inflow of used cars increased, as well as quantity of vehicles with lower mileage. At the same time, in 2015 right-steering vehicles ratio was about 40% and this year the figure has reached 50, i.e. this trend was maintained.

The US auction remains the major supplier, as well as German and Japanese markets, Ogbaidze said.

Re-exports faced certain difficulties. Re-exports became useless started 2011, when Kazakhstan joined the Customs Union, because member countries, namely, Russia is a manufacturer country and therefore, this customs space has high customs taxes. Therefore, our re-exports lost a major part of Armenian market. Losses were recorded on Azerbaijani market too since April 1, 2014, after Azerbaijan banned imports of vehicles manufactured before December 2004. All these factors were deepened by national currency exchange rate collapse, expected changes in customs clearance tariffs. All these factors have negatively finished the current year.

However, small, but positive tendency is noticed. Imports of hybrid vehicles have increased after customs clearance tariffs were halved on them. Moreover, imports of 100% electric cars is becoming also very popular, because they are entirely exempted from customs duties.

Mercedes and Opel maintain leading positions in sales of used cars”, Ogbaidze said.