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Russian Car Sales Slip Into Reverse, Hit By Political Problems

Long-Term Forecast Scaled Back Too, Although Market Will Be Huge.

Long-term growth forecasts for the Russian car market are being slashed, as short-term sales plunge because of political worries, economic problems and currency weakness.

According to industry consultants Roland Berger, 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.

Meanwhile sales in Russia are currently falling. IHS Auto said sales in April were falling at an accelerated rate compared with the first quarter. For the first four months of the year sales fell four per cent to 829,406 compared with the same period of 2013. Market leader was Renault affiliate Lada with nearly 130,000 sales, compared with Renault itself on around 63,500. Kia was in third place with close to 60,000.

IHS Auto said it cut its forecast for Russian GDP growth in 2014 from 2.5 per cent to 1.7 per cent. Car demand was being hit by Russian currency weakness, which is putting up the prices of foreign vehicles, whether they are made in Russia with a big proportion of imported components, or completely built up imports.

IHS Auto forecasts a full year decline of seven per cent from 2013 to 2.59 million. Meanwhile Renault forecast overall market sales could fall up to 20 per cent this year.

Longer term, Russia car sales will rise to 3.3 million in 2020, not the hoped for four million, said Roland Berger, and it agrees with IHS Auto on 2014’s decline.

Politics decisive
“We expect the (Russian) market to decline again this year by around seven per cent, and only in the next two to three years will it recover back to 2012 levels,” said Uwe Kumm of Roland Berger’s Moscow office.

“In the short term, the further development of the political situation will be decisive. Over the long term, the market will in all likelihood be able to grow steadily, but much more slowly than previous market studies have predicted,” Kumm said.

Roland Berger says Russian car sales will increase about six per cent a year for 2014-2016, then drop to 3.5 per cent for 2016-2020.

Russia will still become important market though.

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

“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.

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