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Auto Business in Georgia

19 Mar, 2021

Georgia has established itself as a regional hub for the car trade since 2005, without its own car production industry. New cars are mostly imported from Japan, while used cars mostly come from USA, repaired in Georgia and sold to Georgians and regional customers. Therefore, cars are top export and import commodity in Georgia’s foreign trade. From car re-export activities, Georgia’s auto business earns 31% of total revenues on average annually, by our estimates. 

2020 was a tough year for Georgia’s auto trade, to large extent affected by increased customs duties in Armenia. Car exports almost halved to US$ 404mn in 2020, mostly reflecting reduced demand from Armenia and Kyrgyzstan as these countries increased customs duties from January 2020. Car re-exports were also hindered by travel restrictions and used car market closure in 2020. However, online sales largely supported car trade with Azerbaijan and Ukraine. We expect car exports to improve in 2021, taking into account ongoing economic recovery in the region and last year’s low base.

We estimate full market size of auto business at GEL 3.8bn in 2020, with formal sector accounting for 70% of total market size on average during last 5 years. Notably, high gross margins on used cars incentivize many individuals to trade with cars, leading to large informal turnover in the sector. Another major source of informal activities are bazaars for used car parts. 
Locals demand fuel-efficient cars, mostly used hybrids. Weighted average age of passenger cars registered in Georgia was 8 years in 2020 (7.5 in 2019). Hybrids accounted for 34.6% of total passenger car registrations in Georgia vs 5.9% of total in EU in 2019. In Georgia, used hybrids are preferred over gasoline cars because of their lower total cost of ownership despite higher price, with latter compensated within 3 years of ownership on average.

There are healthy demand drivers on cars in medium-term – including outdated auto park and growing women drivers. Out of 1.38mn vehicles registered in Georgia, only 1.06mn (77% of total) are on roads, while others are lapsed, according to our estimates. Moreover, passenger car penetration in Georgia is only 234 (excluding lapsed cars), far below the rates found in Central and Eastern Europe (e.g. 642 in Poland, 562 in Czech Republic, 355 in Romania etc.). Despite the rising number of Georgian female drivers, only 20% have driving license vs 72% of male as of 2020, showing room for further expansion. We estimate c. 32k female to obtain driving license annually over the next 10 years.

We expect gradual transition towards electric mobility in medium-term. Many drivers shifted to hybrid cars, while electric vehicle (EV) imports are still low in Georgia. Four major barriers keep EV penetration rates low globally and in Georgia also: 1) high price, 2) limited driving range, 3) lack of charging infrastructure and 4) limited choice of available models. However, these barriers are expected to be eliminated in medium-term, leading to 32% of total auto sales being EVs by 2030 globally, according to IEA.

 


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Healthcare sector presentation

18 Mar, 2021

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Georgia's Healthcare Sector

10 Dec, 2020

Demand on healthcare services in Georgia is largely driven by rising prevalence of age-associated diseases and improved accessibility, supported by increased government spending. Public health spending tripled to GEL 1.3bn over 2010-19, reducing share of out-of-pocket payments from 73% to 56% of total health expenditure in Georgia. This ratio is still high compared to EU (16%) and peer EM countries in the region (38%). The government plans to reduce share out-of-pocket health expenditures to 30% of total by 2030.

New wave of reforms aims to make healthcare provision more sustainable through: 1) more targeted UHC model (effective from 2017), 2) new funding model - Diagnostic Related Grouping (DRG, to be launched in the near future), 3) new requirements for hospital infrastructure and human resources from 2021.

Hospital sector in Georgia shows low efficiency. Number of hospital beds stood at 4.7 per 1,000 people in 2019, above peers and many high income countries globally. With oversupply of hospital beds, occupancy rate is low (49% in 2019). Implementation of DRG model is expected to reduce market fragmentation and increase efficiency. Utilization of primary healthcare is still low in Georgia, despite significant improvement in accessibility over the last decade. Outpatient contacts per person stood at 3.6 in 2019 in Georgia vs 7.0 in EU. 

Georgia faces oversupply of physicians and undersupply of nurses, with only 0.6 nurses per physician in Georgia vs 2-5 nurses in European countries. As a result, Georgian doctors are 3 to 5 times less productive than peers in terms of patients treated annually.

Georgia shows high incidence of COVID-19, with total confirmed cases up to 4,400 cases per 100,000 people as of December 9. Furthermore, testing seems to be insufficient to capture all the infected, with average 30% positivity rate in November. Mobility restrictions were reintroduced at end-November to limit virus spread.

COVID case fatality rate remains less than 1% in Georgia, below many developed and emerging countries in Eurasia. More than 7.2k COVID beds are prepared, out of which 6.9k are occupied as of December 10. There is a room to reduce hospitalization rate, relaxing burden on hospital sector. Vaccine candidates against COVID-19 show promising results. Georgia has already ordered first lot of vaccine (worth of US$ 4mn), expected to be available from spring 2021.


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Tbilisi Real Estate Market Watch - October 2020

30 Oct, 2020


Tbilisi real estate market drastically improved in September 2020 along with strengthening economic recovery. Key takeaways from the report include
  • Apartment sales were up in September (+14.4% y/y) after sales contracting in July (-14.9% y/y) and August (-16.3% y/y). Suburban districts dominated sales in 3Q20 as mortgage subsidy scheme supported transactions in budget/economy segment. As a result, the 4 suburban areas accounted for 56.1% of total residential sales in 3Q20 vs 52.0% in 3Q19.
  • New apartment prices were down in July (-8.6% y/y) and price reduction slowed in August (-7.6% y/y) and September (-5.9% y/y). However, this reduction was most likely driven by dominance of economy apartments in total transaction mix rather than market price correction. This means that the government’s 4% mortgage interest rate subsidy program supported real estate prices in 3Q20. 
  • We expect apartment sales to moderate in 4Q20, from September 2020 highs, as rising COVID cases and GEL depreciation may weigh on house buying decision.
Please see the full note here, which brings together real estate sale and price analytics for 3Q20, Covid-19 impacts and other statistical information available in the real estate market.

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