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Anti-crisis measures in auto business to produce results in fall

Mkhitar Mikaelyan:

Anti-crisis measures in auto business to produce results in fall

PanARMENIAN.Net - High car import customs dues in Armenia are conditioned by the fact that the republic forms the major part of its national budget with taxes paid at the border. Assistant financial director of Karkomavto LLC Mkhitar Mikaelyan commented on this and other peculiarities of Armenian auto business in an interview with PanARMENIAN.Net.
Karkomavto was awarded as Best Client of HSBC Bank Armenia. How did the advantage serve you?
We have imported cars and spares. The guarantees issued by the HSBC Bank Armenia allowed us import goods at lower tariffs. Bank guarantees are much more beneficial than taking loans.

How did the crisis affect Karkomavto? How did you manage to keep afloat in 2009?
Like in any other country, the auto business in Armenia was damaged by the crisis. The national currency devaluation resulted in steep decrease in salaries of the majority of the Armenian citizens. Thanks to correct forecasts, the company managed to conclude new agreements and reduce the annual plan. Presently, the cars are sold at extremely low prices, but putting up with lower incomes, Karkomavto counterbalanced the crisis.

Which car manufacturers do you represent in Armenia and what car models are most popular here?
We represent a dozen of car manufacturers, their share in sales volumes periodically changing, dependent on the demand. According to the 2010 first quarter data, trailers, pickups and trucks are most popular. During the past years, economy cars were sold best of all. The tendency continues this year as well.

What’s your company’s share at the Armenian car market? And which services are most popular?
According to our data, we cover 30% of the market. Currently, maintenance is the most popular service. In September 2009, Karkomavto opened Nissan and Renault maintenance centers, thus improving the quality of services offered in Armenia.

Earlier, Karkomavto rendered cargo transportation services as well. Why were these suspended?
The problem was the uncoordinated Black Sea ferry schedule. We could not guarantee the delivery terms for the clients. After unblocking of the Upper Lars checkpoint, we will try to resume cargo transportation.

You signed an agreement with Bogdan Ukrainian company in March 2010. Are there any other projects pending?
With the demand for cars used for commercial purposes increasing, Karkomavto will conclude mutually beneficial agreements with the manufacturers. Bogdan passenger cars will be in popular demand of companies engaged in network marketing. Besides, with the government paying more attention to agriculture development, the demand for farming machine will grow.

Are the credit interest rates affordable for the population? Can they be lowered during 2010?
The credit interest rates are extremely high, due to unpredictable national currency rate, what is risky for banks. As to corporate credits, major companies are negotiating reduction of interest rates with the banks.

How will the obligatory car insurance of a civil liability affect the auto business?
I do not think it will affect the auto business but the drivers will be more careful.

To what extent was the customs clearance facilitated and what should be done for its improvement? Are the fixed dues reasonable?
The customs clearance was simplified in a way. The importing company can itself fill in the declaration, what helps save time [earlier, the declaration was filled in by a customs officer]. The customs dues remain high, as Armenia forms the major part of its national budget with taxes paid at the border. They are lower than in Azerbaijan but much higher than in Georgia. In Turkey, these are almost the same.

Will you expand on the company's plans for 2010?
We will keep up a moderate policy, as the crisis still persists, hampering development of the market. But we expect better results in August-September.

Hripsime Hayrapetyan / PanARMENIAN News