Ukraine’s Auto Industry Output Surges 65% in a Year, But It’s Not Time to Celebrate

January 10, 2022, Kyiv. If the automotive industry were a patient, the 2021 report would sound something like this: “Condition is critically serious but stable. The patient has started breathing on their own after artificial ventilation, but walks in the fresh air are out of the question.” The figures released today by the association “Ukrautoprom” are a classic story of “both laughter and sorrow.” Formally, a powerful 65% growth year-on-year. In fact, the total production volume is just 8,153 cars over 12 months.

Let’s be clear. 8,000 cars is not the volume of a national auto industry. It’s a statistical error for any giant plant in Germany, Korea, or even Russia. For comparison: the Volkswagen plant in Kaluga, Russia, alone can assemble that many in a good month. However, these numbers cannot be ignored either. Because they are a litmus test showing two important things: voracious market demand and a monstrous inability of our industrial sector to meet this demand. For global investors, this signals a market with significant pent-up demand but also highlights the severe risks associated with local industrial underdevelopment and supply chain fragility.

Growth from the Ruins: Passenger Cars Up, Everything Else Down

The dynamics are indeed impressive, especially against the backdrop of the disastrous 2020. As follows from the association’s report, passenger car production grew by 75% — to 7,324 units. This is the driver of all growth. But let’s dig deeper. Essentially, two players made the main contribution: ZAZ (assembly of Chinese models) and “Eurocar” (Skoda, Hyundai). Their story is not about innovation, but about classic screwdriver assembly, reacting to shortages and expensive logistics chains.

The picture with buses and commercial vehicles, however, is bleak. A 10% increase on a tiny volume is not a victory. And the production of trucks (excluding the statistically closed AvtoKrAZ) even fell by 16%, to a miserable 43 units per year. This is not a sector; it’s agony.

That is why the production crash in October (minus 58%) and the sharp 82% surge in November are not signs of health, but symptoms of a fever. The market is jerking due to component shortages, logistics collapse, and demand spikes. Against this background, planning anything serious is an exercise for extreme optimists.

So What’s the Takeaway? Three Conclusions for Business and Investors

Overall, after studying the numbers and calmly analyzing the situation, the following thoughts come to mind.

1. The assembly business is alive. As long as there is demand for new cars and prices for used imports are biting, local assembly capacities have their niche. But this is a business with extremely low added value and zero export prospects. It exists not because of, but in spite of state policy.

2. There is no talk of a real auto industry. That requires hundreds of thousands of units per year, deep localization, related industries, and, most importantly, a clear long-term strategy from the state with real incentives. None of this is in sight. And is not foreseen in the foreseeable future.

3. The commercial vehicle market is a challenge for the bold. Falling production of trucks and minibuses in a growing economy is a paradox. And where there is a paradox, there is an opportunity. Whoever finds a way to organize logistics, supply parts, and offer business an adequate solution can occupy an empty niche. But this will require capital investment and nerves of steel.

The bottom line for the year is simple: the Ukrainian auto industry is not dead. It continues to exist quietly in the form of artisanal workshops on a national scale, catching a wave on market fluctuations. For it to turn into something more, it needs not growth statistics from a low base, but an industrial policy. And that, alas, has never existed and still doesn’t. So let’s celebrate small victories: we at least assemble something. And hold tighter to the wheel of our cars, even if they weren’t assembled here.