Fast Market Research recommends "Ukraine Autos Report Q3 2012" from Business Monitor International, now available

Boston, MA -- (SBWire) -- 08/07/2012 --New passenger car sales in Ukraine rose nearly 9% year-on-year (y-o-y) in May, according to the AUTOConsulting information analytical group. It claims almost 20,000 cars were sold in the month, up 3.5% on the previous month and almost 20% up on May 2011.

However, BMI's research shows that vehicle demand in Ukraine will cool considerably in 2012 as consumers feel the inflationary pinch and become increasingly cautious about taking on fresh credit. Moreover, an overall grim outlook for global demand is likely to hurt Ukraine's export-dependent economy in a big way, further diminishing domestic vehicle demand.

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We believe domestic vehicle demand will cool considerably in 2012 from 2011 levels, as consumers feel the inflationary pinch and become increasingly cautious about taking on fresh credit. BMI forecasts that total sales will rise 7.08% y-o-y in 2012 with 291,224 units shifted.

An increase of nearly 29% y-o-y in Ukrainian new car sales in Q112 prompted BMI to revise up our 2012 forecast, from an original 5.5% y-o-y growth to close to 8%. We believe the Q112 rate is unsustainable throughout 2012, as consumers will likely come under economic pressure during the rest of the year.

We believe that much of the increase in Q112 was the result of highly favourable base effects. Indeed, despite a 36.5% y-o-y growth in new car sales Q111, the market failed to recover to 2009 levels. In fact, the Q112 sales increase failed to match Q109 levels, with the market remaining more than 18% lower than the Q109. All of this indicates subdued consumer sentiment.

We see more cause for concern on a broader economic level. With key exports expected to stagnate, import bills rising, domestic banks on life support and a hryvnia devaluation in the offing, we see considerable risks to economic growth in Ukraine over the coming years. Our Macroeconomic team has downgraded its expectations for real GDP growth in 2012 to 2.4% (from 4.1%) and 4.2% in 2013 (from 4.7%).

Household consumption is likely to be particularly hit by the shrink in credit, as domestic banks go through a period of financial rehabilitation as they repair their balance sheets from the damage inflicted in 2009. This is compounded by devaluation fears (we forecast a 12% devaluation to UAH9.000/US$ in 2012) which has seen the cost of hryvnia-denominated loans soar since Q311 (see our online service, December 1 2011, 'Moderate Devaluation In 2012'). Local news sources reports that interest rate increases on hryvnia loans are already in the triple figures for consumer credit products, and this likely to make vehicle purchases on credit very unattractive.

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