Report "Ukrainian Automotive Market: Passenger Cars, Components and Spare Parts 2007/2008 -2010":

Ukraine is, with a population of 46. mio., one of the largest markets in Central and Eastern Europe (CEE). In the last years, Ukraine has experienced a substantial economic growth. With a nominal GDP of 140,3 bn. USD and growth rates of estimated 7% at constant prices in the next years, Ukraine is above average among the CEE states.

Ukraine’s car penetration is still much lower than in Western European markets, but higher than in other CEE countries like Romania or Bulgaria. In terms of car parc, Ukraine is in a mid-range position among CEE states with about 5,6 mio. cars in parc in 2006. Until 2006 the car parc has experienced only slow growth with a CAGR of 2,38% between 2002 and 2006, as imports of used cars declined through government regulations. As recently as 2006 the average growth rate of the car parc significantly increased and has reached slightly over 6 mio. cars by the end of 2007. We expect this trend to continue and consider the car parc to grow with a CAGR of 10,8% until 2010. Although new car sales make up a major part of the annual additions to the car parc, the majority of cars are still older than 10 years. The major risk is the current economic situation, which could affect the Ukraine substantially and jeopardize economic growth overall.

The import of used cars has declined very strong due to government regulations since 2002. With WTO accession Ukraine has to move away from the policy of import embargos of too old cars. Nevertheless, government still prevents the import of used cars by now charging high registration fees for imported cars.

On the contrary, the new car market experiences substantial growth with an expected CAGR of 23% from 2007 to 2010, supported by the expanded possibilities of car financing. In line with this development, the Ukrainian new car market is together with Russia and Poland the largest new car market in all CIS and CEE countries.

More than 50% of new cars sold in 2007, were domestically produced. These cars are not only Ukrainian brands, but also foreign brands manufactured through contractual arrangements. In 2007, 387.762 passenger cars were produced in Ukraine. With opening of the market due to WTO accession, Ukrainian manufacturers loose their competitive advantages and importers of foreign cars are expected to increase their share of new cars sold. Nevertheless, Ukraine has positioned itself as a production base for automobiles. Although there are domestic brands like ZAZ, the major part of the car production derives from contractual arrangements with foreign car makers.

The aftermarket currently has a size of 0,97 bn. EUR and is expected to increase to 2,06 bn. EUR in 2010. The aftermarket is one of the most attractive sectors in Ukrainian automotive industry over the next years. With further additions to the parc and with more and more demanding customers, better and more frequent service parts are needed.

The distribution system for spare parts is dominated by independent service chains and spare part shops. Official service chains do not play a major role.

In total, the Ukrainian market for passenger car vehicles and the Ukrainian aftermarket are very attractive markets. For companies, aiming to enter the market, convenient financing options and an aggressive sales network with good coverage are a must.

To prepare this market report, we used primary and secondary research methods: expert interviews and consumer surveys – in particular for the market of automotive parts, which is not covered yet by any substantial statistical data – and standard analysis of secondary information available on the topic. Based on our experience and developed competencies we have built proprietary market models to forecast future market development. The report was compiled in the period from March 2008 to September 2008 and hence includes statistical data until December 2007, if available.

The market report „Ukrainian Automotive Market: Passenger Cars, Suppliers and Aftermarket, 2007/2008-2010” analyses in depth current developments of the Ukrainian automotive market. It covers 85 pages and includes 54 tables and figures. The report is available at 890 €. To order, please use the attached order form or contact us at marktforschung(at)globis-berlin.de or +49 (0)30 4005 49 0.

Globis is a Germany-based consulting company with broad international coverage regarding strategy development, especially entry strategies into new markets.

TABLE OF CONTENTS 2

TABLE OF FIGURES 4

LIST OF TABLES 6

SUMMARY 8

1 COUNTRY BASICS 11

1.1 Economic Development 14

1.2 Regional Economic Development 18

1.3 Ukraine and European Union 20

1.4 Accession to the WTO and Consequences 21

2 UKRAINIAN PASSENGER CAR PARC 23

2.1Ukrainian Car Parc 23

2.1.1 Structure of Car Parc by Age 25

2.1.2 Structure of Car Parc by Brands 27

2.1.3 Car Parc in Regional Markets 29

2.2 Passenger Car Sales and Imports 31

2.2.1 Size of Market 31

2.2.2 Market Characteristics New Cars Market 35

2.2.3 Market Characteristics Used Car Market 40

2.2.4 Grey Market 43

2.2.5 Sales Drivers for New Cars 45

2.2.5.1 Car Financing 45

2.2.5.2 Economic Growth and Income Levels 47

2.2.5.3 Changing Regulatory Environment 47

2.2.5.4 Dealership Networks 49

2.2.5.5 Consumer Preferences 51

3 UKRAINIAN COMPONENTS AND SPARE PARTS MARKET 53

3.1 Car Production and Components Market 53

3.1.1 Production 53

3.1.1.1 Major Manufacturers 56

3.1.2 Components Market 59

3.2 Ukrainian Aftermarket (OE, IAM, Fakes) 65

3.2.1 Market Segments Aftermarket 65

3.2.2 Market Size Aftermarket 67

3.2.3 Distribution System for Spare Parts 70

3.2.3.1 Parts Importers and Distributors 72

3.2.3.2 Spare Part Shops 73

3.2.3.3 Service Stations 74

3.2.3.4 Other Supply Channels 77

4 OPPORTUNITIES AND RISKS 78

5 APPENDICES 80

5.1 Major Ukrainian Cities 80

5.2. Sales of Foreign Brands in Ukraine, 2005-2007 83

5.3 Sales per Region, 2005-2007 (9 Monate) 85

6 ABBREVIATIONS 87

Figure 1: Map of Ukraine

Figure 2: GDP Growth Rates at Constant Prices, Change to Previous Year, 2001-2010

Figure 3: Development of Nominal GDPin bn., 2000-2007

Figure 4:Inflation Rate, 2004--2007

Figure 5: Average Wages, in EUR, 2000--2007

Figure 6: Development of Passenger Car Parc, in Mio., 2001-2010*

Figure 7: Car Penetration in Ukraine and Selected CIS- and CEE-Countries, 2007

Figure 8: Structure of Ukrainian Car Parc by Age, 2007

Figure 9: Top-Ten Brands in Car Parc, 2007

Figure 10: Regional Car Penetration in Ukraine, 2007

Figure 11: Size of car parc by regions, 2007

Figure 12: Sales of New Cars in Ukraine, in 1000, 2002-2010

Figure 13: Relative Structure of Car Market by Imports and Local Production, 2002-2010

Figure 14: Import of Used Cars into Ukraine, 2002-2010

Figure 15:Number of Imported Used Cars and Used Domestic Resales in 1000, 2002-2006

Figure 16: Origins of Imported Used Cars

Figure 17: Share of models sold by grey dealers, %, 2007

Figure 18: Share of Financing Arrangements for New Car Purchase, in %, 2003-2010

Figure 19: Development of New Sales (in 1.000) and Average Wages per Month, 2002-2007

Figure 20: Major Purchase Criteria when Buying a Car, 2007

Figure 21: Production of Passenger Cars in Ukraine, in 1.000, 1999-2010

Figure 22: Size of Component Market in Ukraine in mio., 2002-2010

Figure 23 Share of OE-, Fake-, IAM-, Used-Parts for Routine Service, 2007

Figure 24: Spare Part Market Size, bn. EUR, 2007-2010

Figure 25: Market Size for Important Spare Parts, mio. EUR, 2007-2010

Figure 26: Main Distribution Channels for Spare Part Distribution to Car Holders, 2007

Figure 27: Buying Channels for Spare Parts, 2007

Figure 28: Channels for Reparation, Maintenance and Service, 2006

Table 2: Population on regions , 2007 12

Table 3: Monthly Average Wages per Region in EUR, 1999- 2007 19

Table 4: Registration Fees for Imported Cars from 2007 26

Table 5: Car Parc and Sales of New Cars in selected regions, 2007 29

Table 6: Car Market by Imports of Used cars and Local Production, 2002-2010 32

Table 7: Contractual Car Assembling Arrangements by Ukrainian Companies, 2007 35

Table 8: Top Selling Brands in Ukraine, 2006,2007 36

Table 9: Top Selling Models in Ukraine, 2006 – 2007 38

Table 10: Top selling models per class, 2007 39

Table 11: Domestic Resale of Used Cars, 2002-2006 41

Table 12: Sources of Information for the Purchase of a Used Car 42

Table 13: Share of grey dealers per selected region, 2007 43

Table 14 : Import Duties and Motor Size 47

Table 15: Major Ukrainian Dealership Companies 48

Table 16: Dealership networks in Ukraine: Brands 50

Table 17: Production Growth Rates 1999-2007 54

Table 18: Top 5 production volume of models, 2007-2010 55

Table 19: Major Ukrainian Car Maker and Production Volume, 2007 55

Table 20 : Production by Brand, Manufacturer and Volume, 2007 57

Table 21: Ukrainian Component and Spare Parts Manufacturers, 2007 61

Table 22: Special Economic Zones, 2007 62

Table 23 : Selection of Foreign Component Manufactures in Ukraine, 2007 63

Table 24: Foreign Investment Plans of component manufacturers in Ukraine, 2007 64

Table 25: Five biggest Service Station Chains in 2006 67

Table 26 : Selection of the Largest Independent Importers and Distributors of Spare Parts, 2007 72

Table 27: Service Station Networks of Largest Independent Distributors in Ukraine, 2007 74

Table 28: Major Service Chains by Automobile Brand, 2006 75

Table 29: Major Ukrainian Cities (>100.000 inhabitants) 81

Table 30: Sales of Foreign Brands in Ukraine, 2005-2007 83

Table 31: Sales of New Cars by Region in Ukraine, 2005-2007 85