Car sales resume slide

  • 2011-07-27
  • From wire reports

RIGA - The global economic crisis has destroyed Latvia’s middle class, Latvian Authorized Automobile Dealers Association President Andris Kulbergs said at a press conference on July 21, reports This is very well reflected by car sales - the segment of small cars, which made up a significant part of the market before the crisis, is almost non-existent now.
There are very few people prepared to buy an automobile on lease and pay around 100 lats (142.8 euros) a month. Most cars bought by private individuals go to buyers of luxury cars who can pay the entire amount at once.
Another noteworthy group of buyers is wealthy pensioners who were largely unaffected by the crisis, as their income remained stable.

“The automobile market will not survive without leasing,” said Kulbergs.
At the moment, only around 30 percent of all cars sold in Latvia are sold to private individuals, legal entities account for the other 70 percent.
‘Nordea lizings’ CEO Ivars Smits said that many people have underwritten loans that banks issued to other persons, and these obligations make it complicated for them to buy anything on lease. UniCredit Leasing representative Janis Murnieks added that quite often new automobiles are bought by micro-enterprises or, officially, legal entities, although they are used by private individuals.

This is in line with the general tax optimization trend where many companies’ employees are registered as micro-enterprises or self-employed. Authorized Automobile Dealers Association’s council member Ingus Rutins said that this was a problem of insufficient state audit. He believes that will change, though funding is necessary to solve this problem, but solving it now will pay off later. “This is not rocket science,” said Rutins.

In the first six months this year, 4,000 new automobiles were registered in Latvia - a 95 percent increase on the first half of 2010. On the other hand, new car registrations in June fell 22.7 percent from April, to 556 automobiles.