OREANDA-NEWS. On April 01, 2008, members of All-Ukrainian club of car journalists visited Zaporozhye automobile building plant. UkrAVTO Corporation and CJSC ZAZ organized press-tour to the plant, which is a leader of domestic car industry, for leading car journalists, reported the press-centre of ZAZ.

Club of car journalists of Ukraine is created in 2003 as a civil-society organization whose purposes are to popularize the car market of Ukraine and car production of Ukraine. The participants of the tour got a possibility to talk to the Vice president of UkrAVTO Corporation Oleg Papashev and Chairman of Board CJSC ZAZ Nikolay Yevdokimenko, and ask topical questions of interest, and, sure, see with their own eyes up-to-date high technology production of ZAZ, which successful work results are so often described by them in the mass-media.

The main results of ten-year development of the Ukrainian industrial complex and, in particular, Zaporozhye automobile building plant, conditioned by force of Law of Ukraine "On stimulation of automobile building", which validity term expired in 2008, became the main topic of discussion at the press-conference. It is sure that prospects of development of national car industry in the light of Ukraine entering World Trade Organization cannot but be highly interesting for domestic car producers.

Results and prospects
It is true that during ten years of development CJSC ZAZ managed to reach high production and financial results: successful implementation of investment programs, stage-by-stage modernization of production at Zaporozhye automobile building plant, and as a consequence - increase of production volumes.

Analysis of ZAZ work results, definite facts, lines of activities, nearest plans of the leader of domestic car building became property of journalist community at the press-conference for All-Ukrainian and regional mass-media. Vice President of UkrAVTO Corporation Oleg Papashev and Chairman of Board CJSC ZAZ Nikolay Yevdokimenko presented the results and prospects of Zaporozhye car plant to representatives of the mass-media.

Today Zaporozhye automobile building pant is a visiting card of Ukrainian automobile building. This is the biggest Ukrainian car manufacturer and the only company in Ukraine, which has the full cycle of passenger car production. 39% of cars produced in the territory of Ukraine leave conveyers of Zaporozhye car plant. CJSC ZAZ is a part of the group of UkrAVTO companies.

Nikolay YEVDOKIMENKO, Chairman of Board of CJSC ZAZ:
- During the validity period of Law of Ukraine "On stimulation of automobile building" Zaporozhye car plant really did definite work on development of production, execution of those investment obligations, which ZAZ undertook before the government. In its turn, the government offered definite conditions of companies' activity within the bounds of the said Law.

Zaporozhye car plant actively develops itself owing to investments in new equipment. The high level of technical backup of production became confident basis for fruitful cooperation with leaders of the world car building: Adam Opel, GM DAT, Сhery, AvtoVAZ, ТАТА etc. After acquiring FSO - the biggest car producer in Poland - ZAZ strengthened its ties with GM DAT (General Motors Daewoo Auto & Technology), signing agreements about assembly and distribution in the territory of CIS.

CJSC ZAZ has in its structure two car plants located in Zaporozhye (the only car plant in Ukraine, which is equipped with body shop) and Illichevsk, as well as the engine manufacturing plant in Melitopol (MPI engines conforming Euro 2 and Euro 3 emission norms, with 1.2L, 1.3L, 1.4L displacement).

Production conforms to the international standard ISO 9001:2000 requirements and requirements of CJSC ZAZ partners and mainly oriented to C class car consumers (the most fast-increasing segment of the market).

Today Zaporozhye car plant produces 19 models (over 100 modifications) of B, C, D, E class cars - from "Slavuta" and "Lanos" to "Opel" and "Chevrolet". Tendency to continuous renewal of model range remains unchanged. In 2007 ZAZ introduced production of Оpel cars (Astra H, Meriva, Zafira models), Lanos 1.4L, in addition to Chery A15 "Amulet" and B11 "Eastar" models S11 "QQ", T11 "Tiggo" and A21 "Elara" entered the sales network.

Oleg PAPASHEV, Vice President of UkrAVTO Corporation:
- During ten years of existence of Law "On stimulation…" production volumes at ZAZ increased more than 11 times as much. The main thing is that we have normal balanced production, we produce products, which are in demand.

When we think over the question why we need car production, we cannot but say that ZAZ is a source of work places, replenishments of the Ukrainian budget.

ZAZ as a leader of the branch is the important employer and taxpayer: one work place in the company provides for 10 work places in interfacing companies. Work for CJSC ZAZ is provided by 1033 suppliers of materials and components, among which there are 812 Ukrainian companies. ZAZ companies together with suppliers provide over 100 000 people of Ukraine with work and pay one third of tax proceeds in local budgets.

Payments to the state budget and off-budget funds from CJSC ZAZ activity for 1998 - 2007 increased 48,1 times as much: from 37,5 to 1 802,6 million UAH.

The Ukrainian market of passenger cars is one of the first three most fast-growing European markets. CJSC ZAZ plans both consolidation of positions in the domestic market of Ukraine, and further advance to the attractive Russian car market. CJSC ZAZ car production for the domestic market of Ukraine and for export during 1998 - 2007 increased 11,8 times as much - from 24 thsd. to 282,3 thsd. cars.

There is dynamics of CJSC ZAZ car production volume as follows:
" 2003 - 69 600 cars,
" 2004 - 126 000 cars,
" 2005 - 148 200 cars,
" 2006 - 193 100 cars,
" 2007 - 282 387 cars.

ZAZ successfully exports 25% of products. Starting from 2005 CJSC ZAZ actively exports products to Russia. In 2006-2007 Chevrolet Lanos is one of the first three most popular cars in Russian Federation.

CJSC ZAZ development plan in 2008 provides for the following: - Production of 329 835 cars (growth rate 116,8% by 2007); - Production of 62 315 power plants (growth rate 108,9% by 2007); - Production of spare parts for 80 076 thsd. UAH (growth rate 119,2% by 2007);

- Increase of rate of body painting and car assembly to 32 bodies per hour;

- Increase of production rate of assembly conveyer to 640 cars per day;

- Further localization of component production.

Car industry in conditions of WTO
Oleg PAPASHEV, Vice President of UkrAVTO Corporation:
"The event that has been discussed for so long finally happened: in summer the Verkhovna Rada is to ratify agreements, and this year Ukraine will be a WTO member enjoying full rights. Considering that this is a fact done, and we are optimists, we have nothing to do but look for positive sides in this situation. And in order to clearly understand our development prospects we have to understand what it is we get from WTO, what kind of rules of play will be defined".

Harmonization of national legislation with WTO norms:
In order to make national legislation conforming to WTO norms in the sphere of removing restrictions in goods movement from 2003 the following was adopted:
- 59 laws;
- 13 acts of President of Ukraine;
- 15 acts of Cabinet of Ministers of Ukraine.

Among others as follows:
- tax preferences for industrial companies, including car building companies, were cancelled;
- similar excise tax rates for domestic and imported vehicles were established;
- prohibition of importation of vehicles older than 8 years was cancelled.

Until entering WTO 10 more laws are to be adopted.

Until 2012 all national technical standards and regulations must be made conforming to international ones.

Possible changes in the car market and in car production after Ukraine entering WTO:
Reduction of import duties for cars from 25% to 10% will lead to possible reduction of prices for some import car brands by 5-7% and increase of new car import share; sharp decrease of SKD production, which will move to complete car import; possible increase of used car import share; minimization of costs and profit of national producers, which will cause decrease (restructuring) of production and reduction of manpower.

Giving access to the market of foreign components, raw materials and materials will cause decrease of production volumes of Ukrainian components, raw materials and materials, therefore, reduction of manpower.

The main legislative changes in the car market of Ukraine in case of entering WTO:

duties for cars - 10% (before entering - 25 %);

In case of customs procedures Ukraine will not be able to use obligatory minimal prices for imported goods, which will make it possible to understate their declared cost;

Ukraine will have to strictly observe more severe rules of WTO in case of using measures of protection against dumping import, subsidized import or import growth, which can adversely influence development of domestic maker;

On the legislative level it will be impossible to use measures for stimulation of production of domestic products;

Domestic goods will not be able to obtain preference in case of performing public purchase.

The main advantages of foreign producers of cars, materials and components over Ukrainian producers:

In case of Ukraine entering WTO the state has to create equal conditions of competition for domestic and foreign producers.

Foreign producer:

High investment attractiveness of a country for creation and development of production;

High level of technical backup, advance technologies;

Financial-economic relations stimulating production;

Well-developed market relations;

Flexible tax system stimulating production development.

Ukrainian producer:

- weak investment attractiveness of the country for creation and development of production;

- weak technical backup, outdated technologies;

- Financial-economic relations suppressing production development;

- Low level of development of market relations;

- high level of taxation, which does not stimulate development of companies;

high level of attendant financial burdens.

Measures and tasks of the Ukrainian government for creation of equal economic conditions of activity of domestic and foreign car producers in case of Ukraine entering WTO:

Due to Ukraine entering WTO it is necessary to have changes of legislative field for creation of equal conditions of production activity on the single business field of WTO common market.

Making profit taxation base in Ukraine conform to EU norms. In particular, by means of extraction of the following costs out of it:

- innovation development of a company;
- scientific research and design development work;
- improvement of personnel qualification etc.

Decrease of tax load on companies by means of applying grants permitted by GATT/WTO:

- exemption from taxation of profit reinvested in production;

- exemption from payment of import duty for equipment, components and materials, which are not produced in Ukraine and are used for technical re-equipment of production and creation of new work places;

- decrease of load on companies in case of VAT payment by means of increase of bill payment term in case of import of equipment, components and materials;

- exemption from VAT payment of fixed assets, which are paid in as investment in authorized fund;

- introduction of economical incentive mechanism of creating new work places.

Government support of the branch by means of the following:

- adoption of Government program of development of car industry and regulation of car market;

- introduction of effective state guarantees of legislation stability;

- export incentive.

Making norms in Ukraine, which indirectly influence the company's production costs, conform to norms of developed European countries:

- development of mechanism of credit resources price reduction to the level of European countries;

- leveling of electricity tariffs for economic activity entities and population;

- complete transfer of all social infrastructure objects to municipal property.