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Year: Month: All releases Economy Sectors Companies
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Georgia's Auto Business Sector - Regional Hub for Car Trade

10 July, 2019

Enhanced customs procedures and trade infrastructure have transformed Georgia into a regional hub for the car trade since 2005. Successful reforms have enabled the economy to become a car-exporting country without its own car production industry. In the beginning, car re-exports were directed to its immediate neighbors Azerbaijan and Armenia, with destination markets diversified later. After continued growth during 2005-13 (with the exception of 2009), car exports fell sharply in 2014-16 due to the introduction of Euro-4 regulations in Azerbaijan coupled with the regional economic slowdown. However, car re-exports have recovered since 2017 as regional economies stabilized. Azerbaijan and Armenia are the largest export markets, with 71% of the total car re-exports in 2018. We expect car exports to traditional and new markets to grow, taking into account their improved economic outlook and low levels of car ownership.

Auto business turnover posted impressive growth of 14.8% CAGR over 2010-18, reaching GEL 2.6bn in 2018, up 17.6% y/y. The sector’s net profit margin averaged 5.1% in 2015-17 – in line with the total trade sector’s average of 5.2%. Car imports generated more than GEL 123mn in excise tax revenues in 2018 while car re-exports – Georgia’s second-largest export category – stood at US$ 408.3mn.

Government policy targets environmental and safety issues, addresses auto park renewal by making car ownership costly. With environmental and safety issues in mind, the Georgian government increased excise taxes on cars and fuel in 2017 and rolled out a mandatory vehicle inspection program in 2018. The government has also introduced a property tax on cars, pilot paid zonal parking, and car-sharing schemes, among other initiatives. Tax measures have incentivized hybrid car ownership, which has risen to over 48,600 cars in 2018 from 1,198 cars in 2015. This is only expected to continue. Despite growth in recent years, fully electric car ownership overall is low, with only 1,231 cars registered as of 2018. The development of charging infrastructure, the launch of an electric vehicle production plant, free parking facilities for electric vehicles and other government initiatives are set to support greater electric car presence in Georgia in the coming years.

Changes in excise tax structure expected to renew country’s outdated auto park. Georgia has one of the oldest passenger car stocks in the region at an average age of 20.3 in 2017 – higher than Poland (17.3), Romania (16.2), Lithuania (15.5), Russia (13.1) and Ukraine (19.6). Importantly, higher excise taxes on old cars and fuel from 2017 already yielded positive results in auto park renewal. Over 2017-18, 36.2% of the cars that received state registration were under seven years old, up from 9.4% of total clearance over 2012-16.

Georgia lags behind developed countries by number of private passenger cars per capita, showing room for further growth. On a per 1,000 capita basis, private passenger car penetration in Georgia is only 256 – far below the ratios found in Latvia (322), Estonia (419) and Russia (307) but still above Azerbaijan (112) and Turkey (147). We believe that actual car penetration number in Georgia is lower as official statistics incorporates idle vehicles and ongoing vehicle inspection program expected to reveal real numbers by the end of 2019.

The main catalysts shaping the future demand on cars will be the growing number of women drivers, the gradual renewal of auto park and rising household incomes. Despite the rising number of Georgian female drivers, out of the 1.23mn people in the country who hold a valid driver’s license, only 23% are women, showing room for further expansion. On top of this, mandatory technical inspection is expected to force drivers to move to relatively newer cars as 81.4% of vehicles registered in Georgia are already 12+ years old. Mandatory inspection also raises demand for auto parts and repair services. All of these, together with strong demand for car re-exports, are expected to drive auto sector revenue in the coming years.


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Georgia's Tourism Sector - Tourism Market Watch | June 2019

4 July, 2019

  • International visitors (tourists and same-day combined) surged 19.9% y/y to 0.7mn persons in June-19 after 14.2% y/y growth in May-19. This growth was mostly driven by 18.0% y/y increase in tourist arrivals, while same-day arrivals also posted strong growth of 23.6% y/y. Turkey contributed most to total growth, as arrivals surged in June-19 (+45.8% y/y), after continued decline from Sep-18 to May-19. Turkish visitors were main reason of same-day arrival growth in June-19. Arrivals from Russia remained largest source market, growing 30.8% y/y – mostly reflected in tourist growth figures.
     
  • Visitors from the EU were up 29.3% y/y to nearly 52k visitors, with Germany (+67.7% y/y) and Poland (+17.4% y/y) driving growth. Visitors were also pronounced from Ukraine, Saudi Arabia and Kazakhstan, while arrivals from Iran more than halved (down since Jun-18 with the exception of Nov-18).
     
  • Tourism generated US$ 379mn revenues in June-19 by our estimates, up 16.5% y/y bringing 1H19 revenues at US$ 1.5bn, up 11.4% y/y.
     
  • We revise our tourism 2019 growth projection taking into account temporary travel restrictions on flights from Russia to Georgia starting on 8 July 2019. We expect tourism revenues to be flat y/y in 2H19 at US$ 1.9bn as we estimate tourism revenue loss of US$ 200mn in 2019 from reduced Russian arrivals. Therefore, we revise tourism revenues forecast for the full 2019 year at US$ 3.4bn from our initial projection of US$ 3.6bn.


Please see the full note here, which brings together tourist arrival data for reporting month, most recent statistical information available in the sector and 2019 forecast.


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Georgia's Tourism Sector - Tourism Market Watch | May 2019

6 June, 2019

International visitors (tourists and same-day combined) surged 14.2% y/y to 0.6mn persons in May-19 after 1.9% y/y growth in 4M19. This growth was predominantly driven by 18.0% y/y increase in tourist arrivals, while same-day arrivals also increased 6.7% y/y. Arrivals from Russia topped the list being the largest source of visitor growth (+53.2% y/y), followed by Armenia (+15.4% y/y) and Kazakhstan (+84.6% y/y). Visitors from the EU were up 19.3% y/y to over 46k visitors, with Germany and Poland driving growth.

From non-traditional markets visitors were pronounced from Israel, like in previous months. From major source markets, visitors from Turkey continued to fall for 9th consecutive month. Arrivals from Iran more than halved (down since Jun-18 with the exception of Nov-18). Tourism generated US$ 295mn revenues in May-19 by our estimates, up 19.9% y/y.

We expect tourist arrivals to continue strong growth in 2H19, due to high season and fading effect of reduced visitors from Iran and Turkey.

Please see the full note here, which brings together tourist arrival data for reporting month, most recent statistical information available in the sector and 2019 forecast.


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Georgia's Tourism Sector - Tourism Market Watch | April 2019

7 May, 2019

Total international visitors (tourists and same-day combined) to Georgia were up 3.7% y/y to 0.5mn persons in April-19 after growing 4.6% y/y in previous month. This growth was driven by 4.2% y/y increase in tourist arrivals and 3.0% y/y growth in same-day arrivals Russia was the largest source of visitor growth, followed by Armenia and Kazakhstan. Visitors from the EU were up 28.7% y/y to almost 33k visitors, with Germany and Poland driving growth. From non-traditional markets visitors were pronounced from Israel.

From major source markets, visitors from Turkey continued to fall for 8th consecutive month, but with much slower reduction in last two months. Arrivals from Iran more than halved (down since Jun-18 with the exception of Nov-18), and is the major reason behind slowdown in tourist growth figures.

We expect tourist arrival growth to accelerate from 2H19, due to high season and fading effect of reduced visitors from Iran and Turkey.

Please see the full note here, which brings together tourist arrival data for reporting month, most recent statistical information available in the sector and 2019 forecast.


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