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Russian Car Sales Fall Quickens

Business And Confidence Collapse As Rouble Weakens.

“massive net capital outflows have continued which continues to undermine the value of the rouble”

The fall in Russian car sales accelerated in June and is likely to gain pace as business and consumer confidence collapses, according to IHS Automotive.

This will be of huge concern to manufacturers, not least Renault-Nissan, which just completed the takeover of Russia’s biggest carmaker AvtoVAZ, IHS Auto said.

Russian light-vehicle sales crashed 17.3 per cent in June to 199,398, dragging the market for the first half down 7.6 per cent to 1,229,839, IHS Auto said. For the whole year, sales should drop around 10 per cent to 2.54 million.

Last month IHS Auto forecast a full year decline of seven per cent to 2.59 million.

After news of the latest decline in June, the Association of European Businesses in Moscow said it now expects sales will fall 12 per cent to 2.45 million. Earlier this year it had predicted a 1.6 per cent decline. Sales in 2013 fell six per cent, after three years of strong growth.

IHS Auto said Renault-Nissan-AvtoVAZ, with market share of close to 40 per cent, plans to introduce new Lada, Renault, Nissan and Datsun models at the low end of the market.

“It remains to be seen whether loading the Russian market with competing low-cost cars in the segment in which margins are difficult to generate will be the right strategy for the group,” said IHS Auto analyst Tim Urquhart.

“Other (mass market manufacturers) such as Hyundai and Kia are competing effectively in a declining market and are consistently taking share from AvtoVAZ, although no one is able to generate significant growth in the current market aside from Nissan,” Urquhart said.

“The Russian investment environment remains highly unsatisfactory and massive net capital outflows have continued which continues to undermine the value of the rouble. The business and investment environment – already judged unattractive by many foreign and domestic investors – has been hit by the threats of economic sanctions against Russia and retaliation against U.S. and European interests in return due to the ongoing tension in Ukraine,” he said.

Earlier this year, industry consultants Roland Berger said the previous hope that Russian car sales could hit four million a year by 2020 are being scaled back, but there are still high hopes that long-term, the Russian market will still become a source of rich pickings for car makers.

Top ten
Roland Berger then said Russia car sales will rise to 3.3 million in 2020.

“Russia is and remains one of the top ten markets with considerable potential,” said Roland Berger’s Juergen Reers last month.

“Over the next few years, however, it will fall far short of expectations, and as a production location it will be driving with the handbrake on, it not actually in reverse,” Reers said.

In mid-July Russia ordered a ban on Russian state and municipal purchases of foreign made cars. Bloomberg news quoted the RIA Novosti news agency as saying the ban only applied to vehicles made outside Russia, not to foreign brands produced in Russia that met localization requirements.

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