Interview of “Carcomauto” (representative of “Peugeot”, “GAZ”, “PAZ”, “UAZ”, “ZIL”, “Bogdan”, “Elf” and “Standox” trademarks in Armenia) Deputy Finance Director Mkhitar Mikaelyan to “Mediamax” Agency

- In early May, “Carcomauto” was awarded by “HSBC Bank Armenia” as the best customer of the bank in 2009 as to services of trade financing, in particular, bank guarantees. Which financial tools are demanded by car dealers in Armenia, and, in particular, by “Carcomauto”?

- In this case important is the fact of involving companies into international trade. The trade financing tools, offered in Armenia, are mainly the letters of credit, bank guarantees and encashment operations.

The trade financing tools became more urgent in conditions of the financial-economic crisis: the one, who uses these services, does not pay for the purchased good immediately, but, for instance, with the use of a bank guarantee, one may get the good, sell it and only after doing so, transfer the sum to the supplier.

We cooperate with various banks, but “HSBC Bank Armenia” trade financing tools provide for greater flexibility and are more affordable for us. We welcome the initiative of the bank to encourage the most active customers and would like others to also follow this example and stimulate their customers to demonstrate greater activity in trade financing deals.

- Is there a need for financial tools, which are not yet being offered in the local market?

- Per se, there are already almost all financial tools in Armenia, necessary for a company, such as ours. The only thing is that here they are more expensive than abroad.

- What was the influence of the financial-economic crisis, and, as a result, toughening of car crediting conditions in Armenian banks, on “Carcomauto” and the car dealer business in general?

- The crisis and AMD devaluation had their significant negative influence on the financial and economic indices of the company. In 2009, as compared to the previous year, the volume of sales reduced by 40%. Since we are importers, AMD devaluation also had its direct influence on the price, as a result of which the prices increased by 20-22%. 

Such a situation, naturally, could not be considered satisfactory, and due to a number of measures, we managed to somewhat mitigate the negative influence of the crisis. In particular, by carrying a number of measures, we managed to keep the sales with zero profitability and even with loss in a period, which preceded to AMD devaluation, and, due to this, we fulfilled our liabilities to banks in time and completely. 

In the first quarter, 2010, as compared to the analogous period of last year, our sales increased by 5%. At that, the retail sales reduced significantly, which is accounted for the reluctance of the population to make volume expenses. This is why, 70% of our current customers and legal entities.

- State Revenue Committee (SRC) of Armenia facilitated the procedures of car import in February, 2010. Did this fact benefit dealers, and is there the necessity of further facilitation or changes felt?

- As a result of changes, the authorized person of the importer company may present self-declaration to customs bodies, which has really facilitated the process of customs clearance. However, I believe that consequent reforms, directed at further facilitation of procedures, are still necessary. Otherwise, the current picture, when bureaucracy in SRC procedures has become the main obstacle for companies dealing with international trade, will be preserved.

It would be good if the process of car declaration could be realized via internet. It is more preferable for us, if the violators of customs clearance rules are punished more strictly, but instead the procedures are facilitated. The customs procedures today make 15% of the entire time of car transportation. An entire department has been set up in “Carcomauto”, which deals exclusively with customs execution. Even as compared to neighboring Georgia, customs clearance in Armenia is more complex and more expensive.

- What is your assessment of competition among car dealers in Armenia? There are no official dealers of particular car trademarks in Armenia. How does price formation take place in this case?

- Car producers and suppliers usually do not have a second official representative in small countries. However, lack of official representatives of particular trademarks does not imply absence of competition, since it starts from car producers. Importers of various trademark cars, be it the official representative or not, compete among each other by the level of technical service, offering more favorable and attractive conditions for sale, etc. I do not link price formation to competition, since it, first of all, depends on the prime cost of the car, the price of transportation, the size of the customs duty and the target income of the importer. The final prices of new cars imported to Armenia as of today exceed their price without shipping and handling charges by 40-50%.