Car market is taking Western shape
Kairi Kurm
TALLINN - New car sales in Estonia have increased 46 percent this year compared to last year, but it is still far from a sales boom because the number of cars sold per capita is very small compared to such countries as Hungary, Poland or the Chech Republic.
In Latvia and Lithuania the sales are even smaller, but Latvia boasts a large number of luxury car sales.
"Although the sales of new cars in Latvia in the first 10 months of this year were 49 percent lower than in Estonia, the number of luxury cars sold there is bigger," said Erkki Ots, sales director at Japauto.
In Latvia 105 luxury cars (2.2 percent market share) were sold in 10 months, compared to just 53 in Estonia (0.6 percent market share). Last year 89 luxury cars were sold in Estonia during the same period. Cars that cost over half a million Estonian kroons are considered to be luxurious, Ots explained.
But in Latvia 486 luxury Sport Utility Vehicles (SUVs) and off-road vehicles were sold during the same period, so the total market share for luxury cars is more than 10 percent. Ots said that this year 24 Mercedes Benz G500s, 24 Jeep Grand Cherokees and 145 Toyota Land Cruisers were sold in Latvia.
"Few Latvians have the money, but these few have a lot of it," said Ots, who researched the Latvian market with hopes to expand. "Few, on the other hand, have the money to buy a new but reasonable and inexpensive 150,000 kroon ($8,000) family car."
Ots said that one of the biggest reasons behind that anomaly is that people get paid from the black market and that official salaries are often too small to get a lease.
He said that in Estonia the leasing interest rates are about 10 percent, but in Latvia they are about 15-16 percent, and the mandatory insurance is up to 50 percent more expensive than in Estonia.
Ots said that middle-class managers actually earn similar salaries in Latvia and they have the same costs as Estonians, but they cannot prove it to the leasing companies.
He also confessed that an honest company has difficulties keeping pace with other companies due to the size of the illegal market.
"A solid foreign car sales company opened a branch in Latvia two years ago in a very nice location. Their new salon in Latvia was very big and luxurious, better than any other one in Estonia. Although they tried they could not make their way with official salaries because they were not competitive anymore," Ots said.
Ots said that the new car sales business in Estonia has largely gone legitimate thanks to the new customs system.
"All cars imported to Estonia should get a notification from the customs about the imports. The only thing to bargain is the price of a second-hand imported car in the customs declaration," said Ots. "A lot of cash is circulating on the market of second-hand cars."
Ots said that taxes on imported cars in Estonia, Lithuania and Latvia are very liberal compared to Finland. The excise tax and the value-added tax on a mid-range car imported to Estonia is about 22 percent, while in Finland it is about 122 percent, said Ots.
The most popular new cars sold this year in Estonia were Toyota, Volkswagen, Peugeot, Nissan, Mazda, Opel, SEAT and Honda.
Toyota, which sold 797 cars this year, and Volkswagen, which followed with 793 cars, both control about 9 percent of the market. Sales of Peugeots have increased from 378 to 777 cars this year and sales of Opels have more than doubled, thanks to new sales representation in Estonia. The sales of Mazda and Honda have dropped slightly.
A total of 9,012 new cars were sold in Estonia in the first 10 months of this year, which is 46 percent more than last year.
In Latvia new car sales increased from 4,600 to 4,770 this year. In Lithuania 4,874 cars were sold in the first 10 months compared to 4,300 last year.
Ots said that the situation in Lithuania is very miserable. "The number of new cars sold is the same as in Latvia, although the size of the population should assure bigger sales," said Ots.
According to the statistics, about 460,000 cars are registered in Estonia, which makes one car per each third Estonian. The most popular car registered in Estonia is still the old beloved VAZ, with 106,300 sold. Ford is next (49,000), followed by Moskvitch (41,700) and Opel (41,700).
European Commission gives full approval to railway electrification project