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Just Released: "Russia Autos Report Q2 2014"

New Transportation research report from Business Monitor International is now available from Fast Market Research 2014-03-27 22:27:57
BMI remains bearish on the near-term outlook for domestic vehicle sales and production in Russia. A combination of sluggish demand for new cars, and a deteriorating economic backdrop, means that we continue to target declines in both sales and production over 2014.

Light vehicle sales in Russia declined by 6.4% in 2013, to 2,834,753 units, according to figures from the Association of European Businesses (AEB). BMI had long maintained that 2013 would see a slowdown from 2012 levels, when light vehicle sales in the country had increased by 11%. Despite strong annual sales growth in the early part of 2012, autos sales moderated on the back of subdued private consumption in the second half of the year. We maintained that such growth in the segment was on the back of an unsustainable rise in consumer sentiment, fuelled by cheap credit, which was likely to unwind over the course of the year. This played out, and these dynamics continued to impact sales in 2013.

Full Report Details at

We believe this erosion of private consumption will continue as unemployment creeps upward, real wages dip, and access to credit slows. Furthermore, the ongoing weakness in the rouble will serve to make imported autos more expensive in local currency terms. These dynamics have partly informed our bearish sales forecast of a 3% decline in the passenger car segment and a 2.4% drop in LCV sales in 2014. Looking at early trends for 2014, light vehicle sales in Russia declined by a further 5.8% y-o-y in January, to 152,662 units.

A deteriorating sales outlook is also leading to a negative near-term stance towards Russian auto production. Indicative of the worsening outlook for domestic auto production, in January 2014, leading domestic player AvtoVAZ announced that it is to cut 7,500 jobs, some 11% of its workforce, in an attempt to revise its business and restore profitability amid declining sales volumes and operating weakness in its domestic market.

AvtoVAZ's partner, the Renault-Nissan Alliance, is aiming to increase its ownership stake in the company to some 74.5% in 2014, and plans to boost market share in Russia over the coming years by introducing new models and investing in increasing production capacity. However, these plans are cast into doubt by the latest job cuts and it remains unclear whether this is still the company's strategy.

Indeed, we are increasingly of the opinion that the ongoing declines in the country's auto sales may prompt a number of vehicle manufacturers to reconsider their long-term investment decisions in the market. BMI believes that AvtoVAZ will continue to struggle in the market over the medium term, and this will lead to over-capacity issues over the long term.

In January 2014, the Russian government announced that it is to attempt to support its autos industry with subsidies to encourage innovation in the sector. Through to 2016, the government will issue some RUB271bn (US$8bn) in subsidies for research and development (R&D), primarily in supporting jobs growth and compensating for higher costs related to meeting rising emission standards. However, BMI believes that the industry's inefficiencies, including corruption, grossly inefficient bureaucracy, poor property rights, and questionable independence of the judiciary among others, would likely deter manufacturers from investing in the market were it not for these subsidies. Indeed, we believe that imports from elsewhere in Europe would likely constitute a greater percentage of sales in the country in the absence of such incentives.

As the Russian consumer story unwinds over the next few years, BMI expects to see a decline in passenger car sales. This will impact production volumes, and lead to over-capacity issues over the long-term. Accordingly, BMI maintains a cautious long-term outlook on Russia's production potential, and we do not expect to see considerable investment in the market, despite this recently announced subsidy programme. In 2013, Lada remained the dominant player in the local new car and LCV segment (as defined by the AEB), selling 456,309 units for a market share of 16.4%. However, its sales were down by 15% year-onyear (y-o-y), as foreign players continue to make inroads into the Russian market.

Rising to second place over 2013 was French carmaker Renault, whose sales were up by 11% y-o-y, at 210,099. In third place was Kia Motors on 198,018 units (up by 6%), followed by fellow Korean carmaker Hyundai Motor on 181,153 (up 4%). Falling from second at the end of 2012, to fifth in 2013, is US carmaker Chevrolet (a subsidiary of GM), whose sales were down 15% y-o-y, at 174,649 units. In terms of the most popular car models, Lada held first spot with the Granta, followed by the Hyundai Solaris and the Kia Rio. All of the top three are subcompact models.

About Business Monitor International

Business Monitor International (BMI) offers a comprehensive range of products and services designed to help senior executives, analysts and researchers assess and better manage operating risks, and exploit business opportunities, across 175 markets. BMI offers three main areas of expertise: Country Risk BMI's country risk and macroeconomic forecast portfolio includes weekly financial market reports, monthly regional Monitors, and in-depth quarterly Business Forecast Reports. Industry Analysis BMI covers a total of 17 industry verticals through a portfolio of services, including in-depth quarterly Country Forecast Reports. View more research from Business Monitor International at

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