Actually, the number of foreign cars in Yerevan is almost close to the actual number of Soviet cars.
“A car is not a luxury, but rather a means of exchange.” If my memory serves me right, Ford said these words. He wanted to make a car affordable for all levels of society. For Armenians, a car is a means of exchange. In most cases, it expresses the car owners’ character, his position in society and his rights.
What do car lovers in Armenia prefer?-of course, “brand name”. Not only because they are higher in quality than the Russian cars, but also because they are “prestigious”. This is not bad- we are moving forward towards Europe. There are more Armenians who can afford cars than Europeans. We can prove this by taking a look at car prices in Europe (especially Germany) and Armenia during the past couple of years. For example, a 1990 Mercedes Benz, which costs 300 Euros in Germany, can be sold for no more than 7,000 dollars. It turns out that the Armenian consumer spends 2-2.5 times more than the German buyer.
The amount mainly consists of the transportation expenses. Companies charge 1500 Euros for shipping and handling of cars sent to Armenia. In fact, the lower the price of the car, the more difference in the prices because the price for shipping and handling is the same, whether it’s a cheap or expensive car. In the end, it turns out that Armenian middle-class consumers spend more money based on the price difference.
In addition to the fee for shipping and handling, there is also a 10% customs tax and 20% value added tax. What we get is an illogical situation. The majority of Germans try to get rid of cars produced more than 10 years ago. First, they strive for buying new models. Secondly, the European Union places high demands on dangerous gas exhausts and there are fees for that. In developed countries, there are the so-called “car cemeteries”, where car owners pay a little extra money to take their cars there. But now it’s more profitable. Citizens of CIS countries are mainly the ones paying large amounts of money for the cars. As a result, the developing ( I don’t want to say the word backward) countries, including Armenia, slowly yet surely become “second-hand” car markets.
Many are of the opinion that the 30% tax on imported cars (10% customs tax and 20% value added tax) is not fair. Armenia doesn’t have its own car production site (the “YERAZ” is out of competition) so that we can benefit the local consumer by setting high tax rates. Deputy Head of the Internal Revenue Service of Armenia Armen Alaverdyan gives the reason for this by the abovementioned:
“The number of imported cars will rise if tax rates reduce and Armenia will then have its own “cemetery” of used cars.”
That’s not really the case. The market has its demands. If the foreign car is expensive, then the consumer buys an older model at a cheaper price, or prefers the Russian models, which turn into “garbage” especially after being driven on Armenia’s streets. In fact, the Russian model cars are not taxed 10% for customs and are more affordable for the consumer. It turns out that the tax rates actually help make a “cemetery for cars” in Armenia. These kinds of opinions are simply justifications for filling the budget and adding more money to the pockets of the ones receiving the taxes. Why do they have to change anything when the consumers have adapted to the current situation and continue to import more and more cars from abroad to Armenia each year?
Based on official data, 6,000 of the 14,300 cars imported to Armenia in 2004 were foreign brand name cars. As for 2005, the total number of foreign brand name cars was 10,500 out of the 16,484 imported.
This can be explained by the rise in the purchasing capacity of the people. Besides that, the loan system for cars is developing in Armenia. Just recently, Armenian banks have started providing their clients with loans for purchasing used cars.
Tourists visiting Armenia are not only amazed to see the elite construction going on, but also the abundance of “elite” cars costing more than 40,000 dollars (it’s worth mentioning that that is not a high price for high-quality cars; prices for new cars start from 60-70,000 dollars). Based on official data, 161 “elite” cars have been imported to Armenia in 2005. In 2004, that number was 90, while it was 40 back in 2003. But anyone can clearly see that that’s not the actual number. We simply have to understand the statistics in the following way: the Customs Committee has only fixed 40,000 dollars for the 161 “elite” cars imported to Armenia in 2005.
Armenian representations of well-known brand name cars don’t give out information concerning their sales simply because they consider that confidential. For example, “Euromotors” paid a 200 million AMD tax to the state budget in 2005, of which 188 million was given to the customs bodies. It’s not hard to understand that the 188 million AMD (approximately 420,000 dollars) is just 30% of the price of imported cars. So, the company has actually imported approximately 1,400,000 dollars worth of “BMW” cars to Armenia in 2005. Taking into consideration the fact that cars are sold starting from 80,000 dollars, we can calculate that the company has sold 17-18 cars just last year. Meanwhile, according to other sources, the real number is a couple of times higher than that. The same goes for other brand name cars. Based on our sources, more than 10 cars can immediately be brought to Armenia with the demand of some oligarch.
In a word, it’s not always that official statistical data portrays the real image, but even that data shows that there is an increasing demand for expensive cars. Some try to explain the increase in the number of expensive cars as Armenian citizens’ better standard of living and the rise in incomes. However, there are some cars that only the “specially chosen” buyers can purchase. Any oligarch that has self-esteem must ride a super-expensive car, such as a “Rolls Royce”, “Maibach”, or the “Bentley” in fashion now (there is already a lot of talk going on about the “Hummers”. As for the “bodyguard”, he has to drive a couple of “Jeeps”, which are over 40,000 dollars. Based on the data of the National Statistics Service of Armenia, 291 cars costing over 40,000 dollars have been imported to Armenia throughout the past three years. Whoever is interested can take a glance at the list of large taxpayers, see the names of the large and medium oligarchs and count the number of “elite” cars-comparing that with the 291 cars.
If there is a demand for cars, this means that there have to be people to satisfy the demands. Individuals took on the task of importing cars ever since Armenia declared its independence, after which the field started to progress and currently it’s much more organized. The oldest brand of course is still “ArmeniaLada”. The company placed 18th in the list of large taxpayers of 2005. Based on the data within the past trimester, “ArmeniaLada” has moved down a spot in the list.
The “CarComAuto” has gone up from 32nd to 16th. This company, as well as “Muran” and Megna”, are registered as companies each involved in distribution, but they are only formally independent from “ArmeniaLada”.
Last year, “EuroMotors” was three spots higher than the “Avant-garde” distributor for “Mercedes Benz”, but as you can see things have changed around. The distributor for “Volkswagen”-“Eurowagen”-has moved down the list the most. The company paid 306 million AMD to the budget in 2005 and set at the 108th place. However, it has moved down to 507th during the first trimester of this year. Based on this trimester, the company’s taxes have gone down four times and the reason is the low demand for this brand name car.
It’s worth mentioning that the list doesn’t really portray the image of car sales in Armenia. As stated in the article, 16,000 cars were imported to Armenia in 2005, but the specific weight of the companies importing the cars is very low. Another fact can be brought up for that. Nine companies in the list have paid a total of 1.5 million AMD tax all put together and that number can turn to 6-7 billion AMD as an average for the year. Meanwhile, the customs bodies have levied 36 billion AMD taxes for imports of passenger vehicles in 2004. This means that individual importers are the majority of importers in Armenia and most of the imported cars are used.