Car business in Ukraine: market review | Sale of business

… so the real chance appears today for far-sighted investors to purchase fully cost-effective business for the reasonable price. And this business will bring even greater profit after the end of the crisis.

Market dynamics

The car business in Ukraine (associated, mainly, with the car and car spare parts sale) was a very cost-effective business niche for many Ukrainian businessmen quite recently, but it was first (after the banks) painfully felt the shots of crisis on itself.

The following deposits «freezing» and initiations of «national car producers» defence (in fact— screwdriver importers defence) bill strongly reduced actually cars trading (-62%), their production in Ukraine (-84%), and substantially (on 35-55%, depending on assortment) decreased the repair parts market volume.

All that led many enterprises of concomitant sphere (refuelling, car-washings, maintenance stations etc.) by virtue of changing situation have got the «problem» status, and their owners had to search for the strategic investors or (more frequent) simple to propose their business-objects for a sale.

As well as InterCredit has already predicted, operating business sales in the first half-year 2009, has been characterized with the stable growth of the sale proposals, related to the car business (point-of-sale grounds, maintenance stations, refuelling, etc.). As a rule, their owners were indisposed of big car producers support and justly had no hope to live so long to the best times which, according to the numerous expert estimations, for car market only in 2010 — when some car sales revival is expected on a further oil prices falls background.

The number of such proposals grew from 12% in January, up to 14% in May and, in spite of relative calm summer vacations period, saved this growth tendency for the present time. (14,8% in the first ten-day period of August). As for separate car business directions, their dynamics was not so synonymous.

What? Where? How much?

Сomparatively small specialized sale grounds and other car enterprises came away from the market of basic activity most sharply and rapidly (in February-March). They had no straight connections with the big car producers. Curiously, that in spite of practically complete car market anabiosis, only few from the owners of such enterprises decided to propose their business for sale — swingeing majority decided to re-profile their business temporally for other commodities type or even for the different ( from point-of-sale) type of activity.

The part of proprietors acted yet simpler, handing over their business-areas in the long lease and hoping thus however to sit off the crisis, even with losses (leasings rates at the commercial real estate market began to fall notedly from middle of spring). Up to present time the stake of such objects at the operating autobusiness market does not exceed 13%, and their owners prefer not to sell them, but lease out or attract investors in an exchange on part of gained money.

Their prices more depend on the business scale, than on geography of its location and wave in a wide range: from $580 000 (the car saloon in Kriwoy Rog) up to $ 6 million. (complex car sale enterprise in Zaporozhie).

Other groups of operating autobusiness enterprises appeared in the comparatively best position, reflecting at the operating business market. So, the sale propositions peak from the companies, related to transportations, was on May-beginning of June, whereupon their stream went on a slump notedly.

It could be explained both the summer passenger flues increasing on a motor transport and by the appearing possibility of this business seasonal re-orientation on other commodity groups (agricultural produce, raw material for food industry processing, etc.) and because of revival in some other base industries (for example, in building), so — by the traditional freight base (building materials, concrete etc.) partial renewal.

Presently this enterprises group occupies s almost 30% of the operating autobusines market, and prices are waving from $50 000 (investing in the taxi service development in Cherkassy region), up to $1, 6 million (company for concrete mixtures transportation with the headquarters in Kiev).

The various car maintenance stations (autoworkshops, autowashings and other similar enterprises of car-care center) were «lucky» yet more/ They appeared more steady to the crisis, in fact even the autosales fall-off did not entail to the collapse demand reduction for their services. Moreover, some of them even gain new customers — from a number the new car owners, bought them from «grey» dealers, and also those, who purchased the second-hand car.

In the first ten-day period of August -009 the such business-objects were made almost 41% of the all proposals at the operating autobusiness market. Prices range: from $50 000 (car repair franshize for the all Ukraine territory), up to $100- 120 000 (car washing stations in Kiev and Kiev region).

And finally, the «unsinking» group — car refueling stations , practically eternal business, in spite of falling of autosales and present (after some price-cutting in July) fuel price advancing. A market entry The sale proposals for the such business-objects appear today not because of the market reduction, but because the market redistribution. The small players are willy-nilly forced to go away, not having an access to the actually Ukrainian production fuel sources and, thus painfully sensible to the sales volumes declination.

The refueling stations stake makes presently up to 12% at the operating autobusiness market (it is possible to suppose with the large degree of probability, that basic transactions in this group are conducted without special publicness, and buyers having been elected in the very narrow circle of the known oil-traders). Exemplary prices: from $700 000 (refueling station in Lugansk region), up to $1,8 million (refueling station in Zaporozhie)

Tendencies and prospects

The decision factor for the further car market development in Ukraine will become the abolition of 13% raises to the imported duty, which have to be halted this year before September, 7. However, it will not lead to the considerable price declination (and stormy autosales revival as well) up to the end of 2009.

This step (if he however will be undertaken) will affect the first group of autobusiness enterprises (small specialized sale grounds and such other companies) in a greater degree. Most of them will quickly return to their basic activity. For those, who presently still examines the variants of investing in the such business-objects, it is obviously time to make a decision — by the end of August prices will grow up, and the most interesting proposals will disappear from the market.

For companies, whose activity is related to the transportation and different kinds of the car service (with exception of car refueling stations ), will have much more value unfreezing of the long-term credit programs (for the transport upgrading, loading equipment renewal etc.), reanimation of the basic industries work, and also growth of population`s demand for their services. Although all these things are mid- and even long-terms business (1-2 years), these cаr enterprises had already passed the crisis bottom and potential investors will have to get used with a gradual, but steady price increasing

What about the car refueling stations, the time of single players in this business leaves obviously at Ukrainian market, and the final redistribution of the oil market between the big international players could be expected till summer-autumn 2010.

So, nowadays Russian-Britannic TNK-BP prepares to purchase the large refueling stations network after the British- Dutch business concern Shell, which have already purchased the small such network in Ukraine in February. Russian giant «Lukoyl», Polish Polskie Gornictwo Naftowe I Gazownictwo S.A. company and our Ukrainian «Privat» have attentively looked on the other «free lone persons» at the market.