Ukraine’s automotive assembly, parts and sales sectors are continuing to operate despite the ongoing Russian invasion, which as of mid-June had killed more than 9,000 civilians, per United Nations figures, and crippled manufacturing.
The country was once an automotive powerhouse within the Soviet Union, producing large volumes of ZAZ and LAZ vehicles. After independence, production started falling, plummeting 98% between 2008 and 2018 according to the Association of Automobile Manufacturers of Ukraine (Ukravtoprom). However, Ukraine maintained an automotive production base and has become a crucial partner to Western and, more recently, Chinese producers.
Brands such as Skoda, Hyundai and JAC Motors are built in Ukraine, notably in Bogdan factories in the central Ukrainian cities of Cherkasy and Lutsk, and the Eurocar plant near the western city of Uzhgorod. Nevertheless, at the start of 2022, production lines typically were turning out just 1,000 passenger vehicles per month, according to the Ukraine-based Automotive Market Research Institute.
Output was hit hard by the invasion Russia launched on Feb. 24, 2022, with Ukrainian-language automotive publication Auto Consulting saying no Ukrainian manufacturer managed to produce more than 10,000 vehicles last year, and only three built over 5,000.
A Russian missile attack in June 2022 damaged a major factory, the Kremenchuk Automobile Plant, run by AvtoKrAZ, making civilian and military trucks in Kremenchuk, south of Kyiv.
In the early months of the war, Ukraine almost entirely stopped the production of vehicles, especially of Russian models, which became outlawed in Ukraine. Production has since revived, although some companies, such as Bogdan and AvtoKrAZ, have since focused capacity on supplying Ukraine’s army.
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With Russia’s invasion came the destruction of almost 500,000 vehicles, largely from shelling, according to the Automotive Market Research Institute. Another 300,000 vehicles left the country as refugees fled abroad. Many vehicles were hurriedly donated to the Ukrainian military.
Meanwhile, with Ukraine receiving significant financial support from its mainly Western allies, a significant import sector has developed. According to the Ukrainian State Customs Service, some 60,000 vehicles have been purchased from abroad for the needs of Ukraine’s armed forces.
Stanislav Buchatskyi, CEO of the Automotive Market Research Institute, notes that demand for new vehicles within Ukraine, which already was falling before the invasion, has remained low. Between 2021 and 2022, registrations of new cars dropped by 61.2%. The second-hand market, however, has seen a surge in activity.
“In Ukraine, the secondary market significantly dominates. The market for new cars is extremely small, (3,000-5,000) per month. In general, the car market of Ukraine has recovered to about 80% of the level before the start of the full-scale invasion,” Buchatskyi reports.
In July 2022, one of the bloodiest months of the war, registrations of second-hand cars reached an all-time high, 135% more than the same period in 2021.
Buchatskyi explains, “Last year, there was a short period during which it was allowed to import cars from abroad tax-free.” This happened in April and allowed traders to bring vehicles over the Polish border for up to 30% lower cost than usual – which were then distributed across Ukraine for sale. Imports surged for a time, until the exemption for vehicles was lifted at the start of July (2022).
Only imports of electric vehicles are now exempt from customs duties. These are generally manufactured in Europe, with imports of new or used autos from farther away, notably the U.S., being highly problematic.
“The main problem of delivering cars from the U.S.A. to Ukraine is blocked seaports. We had to look for new logistics routes through the ports of Europe,” Buchatskyi says.
Also, imports of used cars have been restrained by the simple fact that due to martial law, men cannot leave Ukraine and import vehicles privately or for commercial ventures, he adds.
For several months after the start of Russia’s invasion, the automotive market also was hampered by a severe lack of fuel, with the military taking priority for deliveries. This now has eased, with fuel supplies for civilians returning to normal levels, Buchatskyi says.
As for the makeup of the Ukrainian passenger-vehicle market, the most imported brand in May 2023 was Volkswagen, with 3,400 new vehicles brought into the country, according to the Automotive Market Research Institute.
The share of EVs in Ukraine continues to grow, despite the war. In May, Ukrainians purchased 4,000 new and used EVs, 54% more than in May 2022. More than half of these were brought from abroad, with sales of the Nissan Leaf being particularly strong.
“Sales are indeed constantly growing, which is facilitated by the expansion of the supply of both more affordable cars with mileage and new Chinese electric cars that can confidently compete with gasoline models,” Buchatskyi explains.
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One of the distinctions of the Ukrainian market is the early adoption of Chinese vehicles, such as those made by Geely, as far back as 2008, and subsequently Chinese EVs, according to Ukraine media reports. Buchatskyi says the supply of European electric vehicles, such as the Volkswagen e-Golf and Renault Zoe, surged later, before the invasion.
In the Ukrainian vehicle parts sector, the situation is stable. At the start of the war, most plants halted production but resumed after several months. Given the disruption of the invasion caused supply problems for assemblers and the aftermarket, customers have since asked Ukrainian factories to build up a strategic reserve – and they have responded, according to Ukrainian electronics manufacturer VD Mais. Sales of parts to the European industry slowed but did not decrease, according to the company.
“There is a great need for cars in Ukraine,” says Buchatskyi. “The average level of motorization today is about 260 cars per 1,000 people, while in the EU it is about 600.”
With the invasion depleting the national fleet, it will need to be replenished with used cars from abroad, he notes. And if Ukraine succeeds in defeating Russia and joining the EU, he expects that its new-vehicle sector will expand significantly.
