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12 Aug. 2023

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Ukrainian car market: what it is like and how much the state budget loses

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Ukraine

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Ukrainian car market: what it is like and how much the state budget loses

According to Ukrainian official statistics for 2022, only 2.6% of cars were purchased by legal entities. At the same time, the number of used car sales on the streets is growing significantly. Find out who is actually involved in the car trade and what is the difference between official statistics and the real situation

Issuing a policy Green card for traveling abroad by car
Issuing a policy Green card for traveling abroad by car
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The car market in Ukraine can significantly replenish the state budget, but this is not happening. To find out why, experts from the Institute of Car Market Research, Analytics YouControl.Market and Automoto.ua carried out s research on the market volume and its impact on the state budget, as well as learned statistics on new and used car buyers.


According to official data, Ukrainian legal entities bought only 2.6% of cars in 2022. The rest of the deals were for individuals. Many purchases were made at car lots, particularly for used cars. Such situations raise questions about how the auto market operates.


Let’s find out the market conditions, how much tax car dealers pay, who sells cars, and how.


The car market in Ukraine: Statistics


Despite the war, people in Ukraine continue to buy cars. The data regarding car dealerships are transparent and clear, as official dealers and importers are operating in the country. In 2022, the numbers are as follows:


● Ukrainians bought 100.7 thousand new cars. About 71% of them were brought from abroad, and 28% were converted or manufactured in Ukraine;

● 1.3 million used vehicle purchase and sale agreements were registered;

● 97.4% of used cars were registered by individuals and only 2.6% by legal entities.


According to the data, the majority of transactions were carried out in service centers of the Ministry of Internal Affairs – 66.8%. This means that most Ukrainians buy vehicles from the previous owner. 32.8% of deals were concluded on commission platforms, which are intermediaries between the seller and the buyer. They are not responsible for the transaction and do not pay tax on the commissions received.


Legal entities in Ukraine are not active market participants. In 0.3% of cases, cars were sold by companies that owned the vehicle. Experts assume that such agreements are the sale of the legal entity's own fleet and not profit agreements.


The situation in the European car market


Legal entities in Poland and Germany sell many used cars. For example, Polish dealers sold 19.6% of the total number of cars in 2022. In Germany, the figure for business sales is even higher, standing at 79%. Only 21% of cars with mileage were sold by individuals in 2020.


Why is the segment of business sales of used cars in stagnation?


Reluctance to pay taxes and bureaucratic difficulties are among the main reasons affecting the illegal activity of internal resale of used cars in Ukraine.


Let's look at the example. If a company wants to provide trade-in services, it should do the following economically impractical operations:


● Register the car at the Service Center of the Ministry of Internal Affairs.

● Get a new registration certificate and number plates.

● Inform the local territorial center of procurement and social support about the purchase.


It is important to understand that after the sale, the new owner will have to repeat all these actions. Therefore, car business owners do not buy vehicles but issue a power of attorney.


However, the situation is better with the import of used cars. The legislation allows a legal entity to import a vehicle and not register it in the service center of the Ministry of Internal Affairs. Therefore, a new owner will register the car after the purchase.


Statistics confirm the positive situation. In 2022, legal entities imported 49% of used cars.




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Where to buy a new car?


YouControl.Market specialists defined that mostly large or medium-sized enterprises comprise the top 25 companies selling vehicles. Only one company is a micro-enterprise.


Only seven companies selling used cars are among the hundred largest auto traders. As you can see, internal dealerships of used cars are not officially conducted, so the country does not receive a significant amount of taxes.


Let's take a look at the five largest car dealers in Ukraine:

● Ukrainian armored vehicles LLC – an enterprise of the defense-industrial complex, specializing in the design and production of military and civilian equipment.

● Toyota-Ukraine is an official Toyota dealer in Ukraine. In 2022, the company received UAH 10.3 billion in net revenue and almost UAH 1.5 billion in profit.

● Avtokapital is the official distributor of Mercedes-Benz Group AG in Ukraine. Last year, the company reported revenue of UAH 7.3 billion and profit of UAH 670 million.

● AVT Bavaria Ukraine is an official dealer of BMW and MINI cars. The company's profit in 2022 was UAH 255 million, and revenue stranded at UAH 5.1 billion.

● Winner Imports Ukraine LTD, dealer of Ford, Volvo, Jaguar, Land Rover, and other brands. It declared UAH 5.1 billion in revenue and UAH 255 million in profit in 2022.


Only legal business that pays taxes can support the economy of Ukraine. In 2022, more than 5,000 companies indicated their activities as trade in cars and passenger vehicles or trade in other motor vehicles (according to YouControl.Market data). At the same time, only 1,288 companies submitted financial statements.


In total, car dealers reported UAH 142.3 billion of net income in 2022. The largest number of such companies is registered in Kyiv, Volyn, Odesa, Kharkiv, and Dnipropetrovsk regions.


Where to buy used cars?


You can find advertisements for the sale of used cars on various sites on the Internet. On average, Ukrainians publish about 240,000 such ads every month. Experts of the Institute of Car Market Research analyzed the data and found that during the last three months, 472 car dealers placed more than 9 ads. Since they sold about three cars a month, they can be considered active sellers.

There are much more announcements from private individuals.


The accounts identifying themselves as individuals posted over 40,000 ads within three months.


The most active sellers work in the Kyiv, Lviv, Odesa, Dnipropetrovsk, and Kharkiv regions.

Since most sellers are not registered as legal entities and do not pay taxes, the country loses the opportunity to supplement the budget. Car dealers published 12.5% of ads.


According to the Institute of Car Market Research, on average, Ukrainians advertise used cars worth about $2 billion every month. The average cost of a passenger car in June amounts to $5,550. After evaluating these figures, experts determined that the monthly income of used car sellers is $3.3 million. The tax on this amount (18%) will be almost $600,000 per month.


Currently, the business of selling used cars is shady. To legalize it, the state needs to change legislation and eliminate bureaucracy. Ukraine has a good example that shows the optimization of the activity of importers of used cars. The changes in the legislation made in 2016 and 2018 streamline the process. Therefore, a new business segment appeared and started to regularly fill the state budget.


Auto rental in Ukraine is becoming more and more popular. Ukrainians and foreigners can rent a car to move around the city quickly and comfortably. Read what are the requirements for drivers, what is necessary for renting a car, and which companies and cars are better to choose.




Our recommendation for a safe and comfortable trip: 


Visit Ukraine Insurance - insurance for a safe stay abroad without unnecessary expenses;

Green Card - compulsory car insurance for traveling abroad;

Visit Ukraine Tickets - book tickets for buses, trains, and airplanes to/from Ukraine and between cities around the world;

Private Lawyer service - professional legal support on visa and migration issues;

Visit Ukraine Merch - buy patriotic clothing and accessories with worldwide delivery.




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