Much of Ukraine’s mass transit still runs on Belarusian vehicles, presenting a problem
Alexander Lukashenko on the bus (Photo:Photo:Пул Первого via facebook)
Long before the full-scale war, Ukrainian cities were occupied by Belarusian heavy equipment. No, we are not talking about tanks and armored personnel carriers, but about Belarusian-made public transport vehicles operated by municipalities across the country. Of course, they will need to be replaced, but who is set to benefit from it?
Over the past 5-7 years, thousands of new buses and trolleybuses have appeared on the streets of many Ukrainian cities, replacing small, uncomfortable minibuses (colloquially known as marshrutkas). Although Ukraine has its own manufacturers, buses from MAZ and trolleybuses from BelKommunMash (BKM) – both based in Belarus – became favorites in municipal procurement tenders.
Thanks to state subsidies from Belarus, they created profitable opportunities for Ukrainian municipalities that wanted to upgrade their mass transit fleets on the cheap. But in the near future, these Belarusian vehicles could turn into a problem.
NV Business investigated whether it is possible to find the necessary replacement parts for Belarusian public transport vehicles, what will happen to hundreds of Belarusian-made buses and trolleybuses, and who and what could replace them.
A History of Sickness
Between 2018 and 2022, Ukrainian cities received 928 trolleybuses and even more buses, according to data from the AllTransUA portal, which analyzes public transport purchases in Ukraine. Almost half of all trolleybuses were produced in Belarus or in Ukraine, by Belarusian companies.
It is more challenging to count buses because, in addition to municipalities, they were a popular purchase by enterprises and other organizations. According to information in public tenders, from 2017 to 2021, Ukrainian cities purchased more than 530 Belarusian-made buses. AllTransUA analysts say that in Ukraine’s large cities alone, there were almost 750 MAZ buses by early 2022. The most significant number were in Kyiv.
“As of January 1, 2023, Kyivpasstrans was operating 472 MAZ buses,” the municipal mass transit enterprise told NV Business.
How did this happen? Belarus could produce vehicles on a larger scale, meaning they always had inventory in stock. This helped reduce delivery times as required by the transport utility companies.
But the critical role was played by the subsidies from the Belarusian government, which drove down the cost of production and maintained sales. The Belarusians were not conscientious competitors, and dumped inventory in order to capture the Ukrainian market, according to Dmytro Kisilevskyy, the Deputy Chairman of the Verkhovna Rada’s Committee for Economic Development.
“They used advantages both in low prices for raw materials and energy resources due to political agreements with Russia, as well as direct state subsidies to factories,” he explains.
Belarus is not a member of the World Trade Organization (WTO), so it had no obligation to comply with the bloc’s restrictions on state subsidies for manufacturers.
Ukraine and the EU Helped
It may be hard to believe today, but just three years ago, even Ukraine’s state-owned banks contributed to the purchase of Belarusian products. For example, in 2020, UkrGasBank launched a financial leasing program for Belarusian equipment (including public transport) with compensation for part of the lease payments.
“This program provides for… compensation from the Republic of Belarus,” — said Kyrylo Shevchenko, the then-chairman of UkrGasBank’s board.
The bank terminated the program in February 2022.
“If there were unfulfilled obligations to the Belarusian side, then their fulfillment is not planned,” UkrGasBank’s press service states.
Ukreximbank implemented a similar program – Belarusian Import. Now, the bank's website no longer contains any information about it.
International financial organizations also accepted tenders from Belarusian manufacturers, but they are now unwilling to comment on these past policies.
Thus, the European Bank for Reconstruction and Development (EBRD) replied to an NV Business inquiry, saying that between 2015 and 2021, it provided more than EUR 110 million ($121 million) in financing (consisting of loans and grants) for purchasing more than 520 trolleybuses in 11 Ukrainian cities. EBRD declined to specify the supplier.
“In the spring of 2022, the EBRD Governing Board decided to suspend Belarus's access to the Bank's resources in response to the invasion of Ukraine. The bank closed its offices in Minsk,” the organization says.
The European Investment Bank, which also financed the purchase of transport vehicles in Ukraine, stressed in comments to NV Business that it currently does not provide any financing to projects which include participants under EU or U.S. sanctions. The bank pointed out that the trolleybuses for Lutsk, Sumy, and Kharkiv, purchased as part of their Urban Public Transport of Ukraine project, were supplied by the Ukrainian company Bohdan Motors. Tenders for buses in other cities are still ongoing. The bank’s press service emphasizes that they “will not finance projects with suppliers from Russia or Belarus.”
Several large tenders financed by international financial institutions (IFIs) went toward Belarusian equipment. In February 2020, Mariupol began receiving 72 BKM trolleybuses as part of a joint project with the EBRD. The formal supplier was a Ukrainian legal entity.
In April 2021, Lviv refused to buy 100 MAZ buses that won the EIB tender.
“We have no right to finance the (Belarusian) ‘regime,” argued Mayor of Lviv Andriy Sadoviy at the time.
The results of IFI tenders in Mykolaiv, Kherson, and other cities around Ukraine caused a public outcry, as the winning offers came from Belarusians or Ukrainian manufacturers using Belarusian and Russian components.
Were there any alternatives?
“There are enough manufacturers in Ukraine to satisfy both domestic and export demand,” Kisilevskyy argues.
“Buses and trolleybuses are produced by the Cherkasy Bus Company (which manufactures for Ataman and Isuzu brands), the Chernihiv Automobile Plant (Etalon), the Lutsk Automobile Assembly Plant No. 1 of the Bohdan Motors Corporation (Bohdan is in the process of liquidation), the Zaporizhzhya Automobile Plant (ZAZ), Lviv Electron, and Brovary Polytechnoservice. There is the TD Litan production line for trolleybuses at Pivdenmash in Dnipro. In addition to them, there are hundreds of Ukrainian suppliers of spare parts, materials, and components that are involved in the supply chains of manufacturers of finished vehicles.”
However, over the past 12 years, the production of public transport vehicles in Ukraine has decreased by 3-5 times, according to the industry association Ukravtoprom.
In addition, some Ukrainian manufacturers simply assembling vehicles from Belarusian-made parts. For example, chassis and other vital components from MAZ were at the heart of the equipment from TD Litan and Polytechnoservice.
“The BKM-Ukraine enterprise is located in Lutsk and is formally Ukrainian, although it is clear where they got their spare parts from,” says an employee of one of the transport companies that operated the Belarusian BKM trolleybuses, who spoke on the condition of anonymity.
Desperate measures
After February 24, 2022, everything changed. It became impossible to buy Belarusian equipment, even from a moral point of view. But hundreds of buses and trolleybuses need to be repaired, lest they turn into mere hunks of scrap metal.
Officials from several Ukrainian municipalities said difficulties are already arising, mainly concerning body parts and other exterior elements.
The situation is partially mitigated by the fact that Belarusian buses and trolleybuses were produced using Western components. A source from the city government of Zhytomyr, where almost two dozen MAZ buses operate, says that the vehicles rely on “ZF transmissions from Germany, American gearboxes, and Mercedes engines.” It is noteworthy that in October 2019, the city refused to buy another 23 MAZ buses because the manufacturer arbitrarily changed the design to use Chinese parts instead of European ones.
Suppliers of complex equipment for MAZs and BKMs included companies from Germany, Moldova, Latvia, and even Ukraine. But the Belarusians themselves produced small parts. Today, these parts must be sourced from warehouse stocks or through intermediaries from countries without sanctions against Belarus.
“If necessary, purchasing specific spare parts with no equivalents available in Europe will become less transparent. If something goes public, then we can expect that people will just re-glue nameplates, passing off parts as European or even Ukrainian,” said Ivan Chernysh, an analyst at AllTransUA.
Complete substitution
Over the first year of the war, the Russian army destroyed hundreds of public transport vehicles in Ukrainian cities. For example, in Mykolaiv alone, Russian attacks damaged 21 buses in a single day, while occupied Mariupol’s fleet of buses and trolleybuses was almost entirely destroyed.
Therefore, new transport vehicle purchases will be required even before Ukraine’s victory, and bringing in old vehicles from European cities won’t cut it.
So who will replace the Belarusians? The answer to this question began to appear at the beginning of 2021, when Ukraine introduced a 35% import duty on finished buses.
“While the MAZ suppliers were suing and simultaneously trying to reorient themselves towards an ‘assembling vehicle kits’ model, Turkish equipment dealers have made their way into the market niche,” Chernysh explains.
Even before the full-scale invasion, Polytechnoservice had begun to switch from MAZ bodies to Turkish AKIA ones.
The sanctions against Belarus introduced by the European Union in June 2021 likely also played a role in this process. The United States joined these sanctions this year.
“Ukrainian and European manufacturers can fully satisfy Kyiv’s needs for rolling stock and components,” Kyivpasstrans states.
However, European technology is much more expensive. Therefore, suppliers have already begun to offer Turkish-made buses from manufacturers like TEMSA, Otokar, Güleryüz, and ISUZU. The process is already underway. For example, on March 20 of this year, Krivyi Rih signed an agreement to purchase 10 Turkish Güleryüz Ecoline buses. This model is already in operation in the cities of Ivano-Frankivsk and Oleksandriya.
But there is one caveat. On July 14, 2022, rules went into force requiring the localization of many publicly-procured goods, mandating they be partially produced in Ukraine. These rules also cover public transport. In 2022, the localization requirement was set at 10%, increasing by 5% annually, until 2030.
The GPA (Government Procurement Agreement) signatory countries are an exception, of which Turkey is not a member. Therefore, Kisilevsky believes that Turkish manufacturers must either build factories in Ukraine to ensure compliance with localization requirements or cooperate with local manufacturers. The Cherkasy Bus Company is already working on the localization of ISUZU.
The situation is much more complicated with trolleybuses. In recent years, the leading suppliers of new electric vehicles have been Ukrainian Bohdan Motors from Lutsk and Belarusian MAZ (together with Ukrainian manufacturers who used its bodies) and BKM. Unfortunately, Bohdan Motors is currently going through bankruptcy and liquidation procedures. They are trying to create a new manufacturer, Bas Motor, using Bohdan Motors’ production facilities, but its possibilities are still very limited.
Deputy Finance Minister Oleksandr Kava, speaking to NV Business, noted the need to build Ukraine’s electric transport, namely trolleybuses and trams.
“A significant increase in the cost of a final trolleybus, together with the expected increase in the cost of electricity, may lead to cities no longer seeing any benefit in buying trolleybuses,” Chernysh argues.
In addition, electric vehicles take longer to produce. Therefore, there is a risk that municipal officials will choose buses when deciding between buying 30 buses tomorrow or 20 trolleybuses in a year.
Are there any prospects for Ukrainian manufacturers? Kisilevskyy believes that state and municipal customers must learn to forecast and anticipate their needs so that Ukrainian factories will be ready to invest in easing production bottlenecks.
“High-tech products are always cheaper to produce at scale,” he explains.
Thus, with the help of localization and forecasting, Made in Ukraine buses and trolleybuses will gradually replace Belarusian vehicles on the streets of Ukrainian cities.
Where will the money come from? First, cities have their own budgets that can be used to upgrade transportation. IFIs will also help. The EBRD is working on procurement financing with several municipalities. A week before the full-scale invasion, on February 17, 2022, the Verkhovna Rada ratified an agreement with the European Investment Bank, which earmarks EUR 200 million ($220 million) for upgrades to urban mass transit. In a comment to NV Business, the bank confirmed its readiness to proceed with the program, provided no funds are to be spent on Belarus-sourced components.
“The Bank will not finance any project if its suppliers come from sanctioned jurisdictions,” the EIB press service stated.
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