OREANDA-NEWS. July 29, 2010. The Parliament of Moldova decided to revise once again the age qualification for car import. Whereas recently the permissible threshold for imported cars had been reduced from 10 to 7 years, this time the parliamentarians tried to restore status quo. In early July after the protracted discussions the amendments to the corresponding article of the Tax Code were adopted at the first reading. However, at the second reading the draft law didn’t win necessary number of votes.     
 
According to the acting President Mihai Ghimpu, the given amendments to the law are primarily oriented to rural people, who can’t afford the luxury cars. However, some deputies opposed such amendments, considering that import of cars aged more than 7 years will affect both the road safety, increasing the accident rate and the ecology.  
 
The “war” between primary and secondary segments at the car market of Moldova is lasting many years. The secondary market dominates, but authorized car dealers literally “tear out” another market share from automobile second-hand year by year. For example, whereas in the first six months of 2009 the share of second-hand cars made up 78,4% of the total number of registered cars, in the first six months of 2010 their share reduced by 73,3% of the market. According to statistics, out of total number of cars registered in January-June 2010 the share of new cars made up 26,7% (2007 pcs); cars aged 2-4 years – 19% (1429 pcs), aged 5-7 years – 50,6% (3813 pcs), aged 8-10 years – 3,7% (280 pcs). It is clear that the rise of age qualification for imported cars will definitely strengthen the positions of used cars importers.
 
Meanwhile, Moldavian car market endures hard times. At least, official data indicate of its “roll back” to the level of 3-year remoteness. Thus, in January-June 2010 in Moldova 7529 cars were registered – this index corresponds to the data of January-June 2007. At the very beginning of crisis in 2008, sales at both primary and secondary markets were growing continuously. But at the beginning of 2009 it became clear that the crisis came to the car market as well: the sales began to reduce monthly.   
 
The secondary segment suffered the same fate. In tote, according to the data as of July 1, 2010, in Moldova 393,8 thousand cars were registered in the State Register of Transport Means. Over six months of 2010 the Moldavian car fleet increased by 7529 import cars (new and second-hand). Over six months of 2009 the similar indexes were 1,7 times as high and made up 13315 cars. Sales of new cars for January-June 2010 reduced as compared to the similar index of 2009 by 30% - from 2874 to 2007 pcs; aged 2-7 years – by 25,3% - from 7023 to 5242 pcs; aged 8-10 years – by 12 times – from 3418 to 280 pcs.

The share of new cars in January-June 2010 made up 26,7% of market (2007 cars) against 22% of market in January-June 2009. Flush times for car dealers at the primary market changed into stable descending sales trend with rather modest indexes. Whereas 2-3 years ago 900 cars on the average were sold in Moldova, in 2010 their index hardly reached 340 cars.

In whole, following the results of January-June 2010 the reduction of sales was registered in all car classes. The share of small class cars A/B accounted for 38,1% of new cars sold (765 pcs); SUV – 24% (482 pcs); compact-class – 18% (361 pcs). 

If speaking of car makes, the largest sales were registered at Suzuki (by 150%), Chevrolet (43,2%), VW (19,4%), Daewoo (15,6%), Subaru (8%), Toyota (2,4%).
 
Top-15 sales brand-leaders in January-June 2010 consisted of: Lada (263 pcs), Dacia (248 pcs), Toyota (173 pcs), Skoda (157 pcs), Mitsubishi (127 pcs), Chevrolet (126 pcs), Hyundai (118 pcs), Mercedes (84 pcs), Ford (81 pcs), Daewoo and Volkswagen (74 pcs each), BMW (56 pcs), KIA (42 pcs), Suzuki (40 pcs), Nissan (37 pcs). The share of these makes accounted for almost 83% of total sales volume of new cars.

 Financial crisis affected the car sales in the European Union – car market of the majority of participants “sank” considerably. For example, sales at the leading car market of Europe – Germany – reduced since the beginning of the year by 28,7% (1,46 million pcs). Over the first six months of 2010 the negative dynamics of sales was observed in the nearest countries as well: in Romania 36,6 thousand of new cars were registered (by 41,5% less than in the same period of 2009), in Bulgaria – 7,3 thousand pcs (-43,2%), in Hungary – 22,3 thousand cars (-43,8%). However, in whole, the sales of new cars at the EU market in January-June 2010 increased by 0,2% compared to the similar indexes of 2009 totaling to 7,28 million pcs. The largest sales growth over the first six months of 2010 – 57,7% compared to the same period of 2009 – was registered in Portugal that imported 115,2 thousand new cars in January-June 2010.

According to experts of the European Automobile Manufacturers’ Association (ACEA), the reduction in new cars sales was the result of completion of so-called “rendering” programs in Western European countries, where with the help of various state programs on support of consumer demand they managed to maintain the high sales volume at the car market practically over the course of 2009. Currently, these programs are completed and economic situation in Europe remains difficult, that’s why the customers aren’t hurry to the car dealers. According to international experts, slump in car sales in Europe will continue, and following the results of 2010 it may approximately account for 9%. Such situation will also introduce the redistribution of market structure in favor of corporate sales.     

Moldavian experts comment on the situation at the market quite reservedly. Though current 30% slump in sales at primary car market of Moldova was upsetting but rather predictable. Financial crisis reached us later than other countries, giving Moldavian car dealers time to study the foreign experience in order to anticipate possible mistakes and prevent bankruptcy.

Once again the crisis pointed out the shortcomings of current leasing structure in Moldova: cars dominate in portfolios of leasing companies. Following the results of 2009, 85% of funds, provided to leasing companies, were channeled at purchase of cars by individual and legal persons. The volume of car leasing reduced twice. Leasing companies began to study the credit history of clients more thoroughly; denial of financing became more frequent.

The companies “secured themselves” and reduced the period of leasing contract: the share of finance in leasing structure, provided for the period under 3 years, increased from 56% of total volume of provided funds in 2008 up to 68% - in 2009. Moreover, the financing for 3-5 years also reduced – from 36% to 32% and more than 5 years – from 8,5% to 0,3%. Leasing companies increased the requirements to the amount of initial installment (not less than 25%, and 30-50% on the average from purchase cost), and increased the rates of interest – 12,5-13,5% on the average in foreign currency (in some cases the rate of interest reached 16%). Meanwhile, some economic experts forecast a new wave of crisis specific for Moldova and logically resulted from political crisis.          
 
Car purchasers are also acting quite carefully. Against the background of reduction of population income, the maintenance of a “four-wheel friend” is quite expensive: petrol, car insurance, spare parts and auto repair, “hygienic” support and other goods and services for car industry are rising constantly in price.  
 
The experts don’t undertake to make accurate forecasts of market development. The aggravation of political and economic situation, unpredictable foreign currency fluctuations, unrestrained excise policy of the state and other factors doesn’t allow the car dealers to make serious maneuvers at the market. The restrained forecasts of car dealers suggest the annual price growth not less than by 10-15%, and the considerable sales growth isn’t expected in the near future. In the crisis contexts it remains unchanged only the tendency to flood … flood of Moldavian car market with old cars from Europe.    
 
COMMENTARIES OF EXPERTS:
Yurii Zgodov, General Director of Nistru Lada SC:
 
Since the beginning of the year Nistru Lada is taking the highest positions on the sales volume of new cars in Moldova. Mainly it was due to our partners, who offer the accessible financial resources for car purchase (car loans, car leasing).
 
In whole, the influence of crisis is certainly felt. We have to reduce the company’s expenses to the maximum, to be more flexible. The conditions are constantly becoming tougher for car dealers. 
 
Today it’s complicated to make the forecast on Moldavian car market development, there are too many nuances. The only thing, that is known for sure, is the intensive replenishment of Moldavian car market with old cars in the near future. And the prices, by the most conservative estimate, will rise not less than 10% every year.  
 
Victor Shumilo, Director of Continent company (official distributor of Toyota in Moldova):
In spite of the crisis, the first six months of 2010 in our company finished positively against the same period of 2009. The sales reduced greatly for the cars with large engine volume the excise rate of which had been increased in early 2010.   
 
The structure of purchasers has changed slightly because of the crisis, particularly, the volume of corporate sales reduced considerably. However, some of our “budget” proposals for individual persons, such as Toyota Corolla City priced at not more than €13 thousand, are in popular demand at legal persons as well.
 
According to preliminary calculations, due to regrouping of sales in classes the car sales in our company will increase by 15-20%, compared to 2009, before the year is out. The sales of cars with large engine capacity will reduce to the same amount. Starting from July 15, the prices for new cars increased by 5-6% and in the near future serious changes in price we don’t forecast.
 
Victor Miculet, General Director of Auto Space company (general importer of BMW AG Concern to Moldova):
The first six months of 2010 at the car market of Moldova can be considered as relatively stable. Certainly, the sales reduced as compared to the last year. But every new month differed from the previous one insignificantly, suggesting the market stability.
 
The prices increase regularly and in the near future there won’t be reduction of prices, on the contrary, the growth will continue by about 2-3% as compared to 2009. Moreover, it’s not the car dealers, who determine such tendency, but the car manufacturing plants.
 
In current conditions, it’s quite difficult to make any forecasts, all depends on political, socio-economic situation and money flows in the country. Unfortunately, the amendments to the legislation that aren’t of benefit to car market, state and ecology are initiated again. Our authorities develop the secondary market instead of developing the road infrastructure, reducing the barriers that will make the new cars more accessible ... Besides, all neighboring countries prohibited the import of old cars aged more than 5 years, but in Moldova the situation is inside out … With such approach the civilized car market is an utopia for our country.       
 
Alexandr Corsac, the Marketing Manager of ELITA 5 AUTO centers:
In January-June 2010, the sales share of 5 car brands, imported by Elita-5, accounted to 6,2%. The share of Mitsubishi, taking the largest part of sales in our company, made up 9,45%. The slump in sales on the whole model range exceeded 30%.
 
Both financial crisis and political situation in Moldova became the reason for sales reduction at the car market. Our company was considerably affected by the instability of foreign currency rate because prices for our cars were fixed in USD. Many car dealers resolved this problem by changing USD for EUR and increased considerably the cost of car. Besides, whereas the car prices were only reducing (within various sales promotions, by 5-15% on the average) up to now, the new lots of cars are imported at higher prices – the manufacturers increased the purchasing price by about 10%.
 
In summer, the slump of activity, traditional for this time of the year, is observed at the car market of Moldova. I think, in July-December 2010 the sales volume of new cars will be about 15% higher than in January-June 2010. 
 
Sergiu Pronoza, General Director of Alvim-Auto (official distributor of KIA Motors in Moldova):
 As it was expected, in January-June 2010, the slump in car sales continued. But in the second half of the year the activity at the market will grow: the cars are wearing out and some time or other people will feel the necessity to purchase a new car. 
 
The corporate sales reduced slightly but the demand here will become more active in the near future: traditionally the companies renew the vehicle fleet once in 3 years. Because of the crisis the companies will renew the vehicle fleet a little bit rarely – once in 4 years, for example. The KIA cars are given a five-year warranty, so our clients renew the vehicle fleet even more rarely.  
 
Regarding the prices, we didn’t change them since the beginning of 2010. Many car manufacturers reduced the production volume considerably, consequently they had to increase the production cost. In KIA Motors this didn’t happen, on the contrary, the production volumes increased. According to our forecasts, before 2010 is out, the sales volume will increase by approximately 5%, and the higher sales growth is expected in 2011 – not less than 10%, compared to 2010.