Boston, MA -- (SBWIRE) -- 04/30/2014 -- In Ukraine, vehicle production increased 83% year-on-year (y-o-y) in February, to 5,344 units. Following strong growth in January, output has increased 130.8% y-o-y over the year to date, to 8,658 units. We attribute this recent surge to extremely low base effects and resurging exports. BMI does not expect this to continue over the course of 2014, however, as trade with Russia, Ukraine's largest export destination, is likely to be curtailed in the coming months on the back of ongoing political tensions. BMI is increasingly bearish on the country's macro picture and we expect this to deteriorate further. Moreover, BMI maintains a bearish view on the country's manufacturing activity and business environment more generally, and believe this will weigh on output growth.
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Currently, BMI forecasts total vehicle output growth of 7.1% in 2014 on the back of low base effects from a weak 2013 and pent-up demand from sustained declines in recent years. The majority of production is for export, and the demands of the domestic market are met chiefly by imports.
BMI forecasts a 5% decline in vehicle sales in Ukraine in 2014. This comes from a 5% drop in passenger cars and 5% drop in the commercial vehicle (CV) segment. Downside risks to this outlook remain firmly to the downside, as a further deterioration in the political and economic outlook could severely impact vehicle sales.
Passenger car sales in Ukraine increased 5.9% y-o-y in the first two months of 2014, to 27,078 units. We attribute this increase to low base effects from the poor sales in early 2013, as well as pent-up demand in the market in the months following the sharp declines. We do not expect this growth to continue over the coming months, however, as these dynamics wane and the ongoing political unrest in the country impacts consumer sentiment in general, and more specifically, the passenger car segment.
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