The auto market is ready to pop in the Ukraine, the sprawling market immediately east of the expanded European Union.
To many in western Europe, the Ukraine is easy to lose among the other former satellite republics of the Soviet Union, part of a vast plain stretching to the Ural Mountains.
But today’s Ukraine is different. It’s huge, a larger area than any country in the EU. Its 47 million population is greater than all but four EU member states.
And they are buying new cars – 265,475 last year, up 25 percent from 2004, said data provider Ukrainian AutoConsulting. That total would make it the No. 10 market in the EU, ahead of Switzerland and Poland.
CSM Worldwide, a consulting company, forecasts annual 10 percent growth in Ukrainian new-car sales both this year and in 2007.
And now Korean automakers have discovered the Ukraine, too. Not only are they gaining in western Europe, they are establishing themselves in the East as well.
In the last quarter, two different Ukrainian automakers started knockdown assembly of Hyundai, Kia and SsangYong models.
All three major Ukrainian passenger-car builders now have ties to Koreans. A fourth smaller carmaker, Eurocar, builds Volkswagen, Skoda and Audi knockdown-kit models in southwestern Ukraine near the Slovak and Hungarian borders.
The largest local car manufacturer, ZAZ, constructed its primary assembly and engine plants as a joint venture with Daewoo. ZAZ still builds the Daewoo Lanos under license from GM Daewoo Auto and Technology, the successor to Daewoo, and has close ties to General Motors, majority owner of GM Daewoo.
Aiming to grow
Both new Ukrainian-Korean deals are starting small, but expect to grow as the Ukrainian market develops.
l Krasz has been a local assembler of Russian brand cars in a 30,000-capacity plant in Kremenchug in central Ukraine. Because of changes in national tax laws, Krasz halted production of GAZ and UAZ models last year, but built 15,000 so-called Lada classic 2104-2107 models from Russian automaker AvtoVAZ.
“Krasz plans to build 15,700 units of Lada models in 2006,” said Vadim Skarupin, factory marketing director.
In November, Krasz started making SsangYong Rexton SUVs.
Krasz also assembles about 1,000 heavy trucks a year for Chinese automaker First Auto Works.
The SsangYong connection will grow this year, said Alena Olisenko, marketing director for AIS, a distributor for SsangYong and Citroen and owner of a number of VAZ, UAZ and GAZ dealerships. AIS controls Krasz.
“We will build about 770 SsangYong off-roaders,” Olisenko said. “But we also will introduce the SsangYong Kyron in March and the Actyon in June.”
l Hyundai and affiliate Kia are working with LuAZ in Lutsk in northwestern Ukraine. LuAZ is controlled by bus manufacturer Bogdan group. The Lutsk plant assembles various Lada models including the 110 and Niva from AvtoVAZ. LuAZ also assembles heavy trucks for Hyundai and Isuzu.
Starting in October, LuAZ added semiknockdown assembly for the Koreans. By year-end, it made 694 Kias including the Picanto, New Rio, Cerato, Magentis, Opirus and Sorento – and 528 Hyundais including the Santa Fe, Tucson, Elantra and Matrix. This year, LuAZ plans to build 2,000 Hyundais and 3,800 Kias.
But LuAZ’s carmaking will grow in 2007. Bogdan is refurbishing its busmaking plant in Cherkask in central Ukraine. It will transfer car assembly there from Lutsk by summer next year, then move its bus manufacturing to the Lutsk plant.
In Cherkask, LuAZ will have capacity for up to 120,000 passenger vehicles a year, half for Lada and half for Hyundai and Kia. Cherkask will be a more capable plant that can weld stampings and paint cars.
The Ukraine is a fast-growing market. Last year, 265,475 new cars were sold, up 25 percent from about 212,000 in 2004, according to data from Ukrainian AutoConsulting.
It is often overshadowed by larger neighbor Russia, but the government is working to strengthen economic and political ties to Europe. Except for Russia, the Ukraine was the biggest economic force in the former Soviet Union, both in agriculture and industry. Its vehicle-building industry was dominated by heavy trucks and buses, but three manufacturers have emerged as passenger-car makers since the country gained its independence in 1991.
- ZAZ, which last year acquired Polish automaker FSO
- LuAZ, the car-building arm of busmaker Bogdan group
- Krasz, a small automaker in central Ukraine.
Area: 604,000 square kilometers (larger than France)
Population: 47 million (more than Spain or Poland)
2005 passenger-car assembly, in units
- ZAZ 148,163
- LuAZ 30,690
- Krasz 19,318
- Eurocar (VW) 11,193
Source: Global Auto Systems Europe
ZAZ’s growth
The planned expansions at Krasz and LuAZ will create more of a challenge to ZAZ, which dominates the Ukraine in both production and sales. Its owner is UKRAvto, which operates a large chain of Ukrainian dealerships and acts as importer and distributor for several foreign automakers. It also operates a chain of Ukrainian fuel stations.
ZAZ’s position is strong.
Since ZAZ added Poland’s FSO last year to its main facility in Zaporozhye and a semiknockdown plant in Illichivsk near Odessa, it has three assembly plants and an engine-assembly operation. It has invested to upgrade the Zaporozhye facility. In 2005, it added metallic colors capability and a E7 million addition to paint plastic exterior parts.
FSO gives ZAZ access to the EU. A Russia-Ukraine economic treaty gives ZAZ low-tariff access to the Russian market. UKRAvto’s multi-brand dealerships captured 56 percent of Ukrainian sales last year.
ZAZ assembled almost 150,000 cars last year – more than 70 percent of Ukrainian car output – but it must build what others design. The only models it has full rights to are the aging Soviet-era Slavuta and Tavria cars and a Tavria pickup.
It assembles models for AvtoVAZ and an old-generation Opel Astra. It assembles three versions of the GM Daewoo Lanos for itself and another version with a Chevrolet badge that GM sells in Russia.
ZAZ also assembles various models from kits for DaimlerChrysler and GM for sale in the Ukraine.
– Lyle Frink contributed
