Vehicle supply difficulties in the past for many makes in Estonia

Vehicles in a car dealership
Vehicles in a car dealership Source: Siim Lõvi /ERR

Dealerships have more new vehicles in their lots again and are once again willing to organize sales campaigns. Prices of new vehicles are set to go up in 2024 as dealers tend to hike prices in the first quarter, in addition to Estonia's looming VAT hike.

While last year was a time of price hikes and prolonged waiting times due to the chip shortage in the world of car sales, several dealerships now offer a wide range of cars already in Estonia, some at considerable discounts.

Risto Sikk, head of sales for Skoda dealer Auto 100, told ERR that the general situation has calmed down and that improvement is on the horizon. Supply of most models has recovered in 90 percent capacity, while customers who order a new car from the factory have to wait a month or two. Only gasoline-powered versions of the Octavia have a longer waiting time as the model is very popular.

"The situation is improving weekly also regarding the Octavia, and we have over 50 cars in our lots ready to be sold," Sikk added.

Rene Varek, executive manager of Toyota seller Amserv Grupp, said that they also have more popular models in their own lots or with the regional importer that can be in Estonia in a few weeks.

"Rather, supply is normalizing for more popular models," Varek said.

He added that while sales campaigns were few and far between for a time, more can now be seen both from importers and financing providers. Rising Euribor rates have left consumers cautious, which is why fixed-interest campaigns have appeared, which the manager of Amserv said has brought them quite a few customers.

But supply troubles are not over for everyone. Leino Luik, head of sales for United Motors that sells BMW, Jeep, Alfa Romeo, Mini and Rolls-Royce cars, said that the situation can differ from one make and model to the other.

"Looking at the big picture, the situation is much better than it was when cars simply ran out during the Covid period. There are campaigns for lot cars and discounts, meaning that certain models are not selling, while others cannot be had and delivery times can be very long. The waiting time for some models is a year or even two," Luik said.

Share of electric cars growing quickly

Luik said that there will soon be no cars that aren't electrified to some extent.

"Looking at the relative importance of electric vehicles, we closed last year with an EV market share of 3.3 percent in Estonia, while it's close to 10 percent today. EV sales are booming in Estonia, even though we are still far off the European average of 22 percent," he said.

The United Motors representative also said that [full EVs aside] the choice for a new car will soon be between hybrids and plug-in hybrids.

"Because plug-in hybrid vehicles are being refreshed, the technology is becoming more expensive, the prices of PHEVs and full EVs will start to converge. The myth that an EV is expensive will disappear," Luik said. "Electricity is the only realistic alternative to the internal combustion engine. Everything else, whether we're talking about hydrogen or other technologies, is still in the testing phase, in the realm of research and not yet attainable for customers."

Estonia is set to hike its VAT rate from 20 percent to 22 percent next year. The executive manager of Amserv said that while this does not affect car sales yet, it will next year, and that a price hike of 2 percent is considerable in the case of a new vehicle. Dealers also tend to hike prices in the first quarter of the new year.

"It is hard to say how much prices will rise on top of the effect of the tax hike. Manufacturers have not yet notified us of price changes, while there will likely be some," Varek said.

He added that the addition of a car tax in 2025 means many buyers are looking at the CO2 emissions and the wider environmental aspect of vehicles. A relatively fragile economic situation means that buyers looks at the total cost of ownership. Amserv and many other sector companies believe the situation on the new cars market will stabilize in the coming years.

"Because many buyers have been postponing decisions, the market might be on par with this year or even slightly better next year, " Varek said. "The market will be challenging next year, while I do not see cause for panic or pessimism."

Buyers basing decisions on practical considerations over emotion

Auto 100 has not experienced the effect of the looming VAT hike either, while Risto Sikk said that Estonia's decision to postpone the car tax has had a calming effect and people have not rushed to buy vehicles ahead of it.

"The hope now is that the car tax will also support reducing CO2 emissions and a newer fleet. Estonia still has one of the oldest personal vehicle fleets in Europe, meaning that we should support buying new cars, not the other way around," Sikk said.

The sales director for United Motors said that car sales headed up when the car tax plan was first unveiled. Luik added, however, that there is always an uptick in sales in spring, which is why it is difficult to measure these effects.

While the economy is living difficult times, Luik suggested that people have not run out of money and have rather switched to a savings regime – the future is uncertain and people dare not make big decisions, which buying a car surely is.

"We are headed toward more practical and less emotional decisions. People rather change cars when they need to," Luik said. "We are definitely not seeing optimism in the context of looming tax hikes and uncertainty. Rather, people are more cautious about buying."

New car sales remain stable, with around 1,800 vehicles registered monthly, while many are bought by companies and major customers.

"If we had a way of highlighting private individual purchases, I'm afraid we would see a decline, but there is no official statistics for that in Estonia," Luik said. "Talking about what next year will bring, I would not forecast a major boom. I would be happy if we managed to retain this year's level."


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Editor: Marcus Turovski

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