Russia New Car Market Stands At 252,314 Units, Down By 36% In The First Two Months Of This Year

July 31, 2009 - PRLog -- As signposted in our Q1 report, the double-digit growth experienced by the Russian automotive market in recent years came to an abrupt end in 2009, as a result of the global financial crisis; indeed there has been a sudden and dramatic reversal, at least in Q209. In February, according to estimates from Russia's Association of European Businesses (AEB), new car registration in Russia fell by a staggering 38% year-on-year (y-o-y) to 134,912 units. Taking into account the 33% y-o-y fall in car sales in January, the country's new car market now stands at 252,314 units according to the AEB, down by 36% y-o-y in the first two months of this year.

Overall car sales for the key industry players were down between 11% and over 50% y-o-y in February.

AvtoVAZ, the market leader, lost 36% in sales, down to 46,197 units, while General Motors (GM) sold 50% fewer vehicles in the same month. Other companies such as Ford Motor (10,497 units, down 25% y-o-y), Hyundai Motor (7,669 units, down 54% y-o-y) and Nissan Motor (7,364 units, down 44% y-oy) also experienced declining sales for the period. In addition, Japanese used car exports to Russia fell by 91.4% to around 2,400 units in January 2009, primarily due to a rise in import duty in Russia.

With the crisis deepening in February 2009, according to Russian news daily Vedomosti, Russian auto manufacturers have requested almost RUB30bn (US$863) in state guarantees due to slowing vehicle demand and mounting debts. AvtoVAZ, the largest of these companies, is currently seeking loan guarantees worth RUB10bn from the state, company president Boris Alyoshin revealed. Falling vehicle sales has made it difficult for the carmaker to repay debts to parts suppliers, taking the company's overall debts to RUB15bn. Additionally, the carmaker has three other liabilities amounting to nearly RUB13bn which are to be repaid by June 5, namely a bond option worth RUB5bn (due on May 20) another bond of RUB3bn and a RUB5bn loan from Sderbank (both due by June 5), according to Vedomosti.

In a further desperate bid to protect the domestic industry in January 2009, an amendment to Russia's customs code and tariff was approved by the authorities whereby import duties on foreign cars will be increased by 20-80%, depending on the age and type of car. The Russian industry and trade ministry confirmed that the changes were made to protect domestic manufacturers, including foreign manufacturers operating assembly plants in Russia.

BMI believes the hike in import duty is unlikely to cause any sharp increase in demand for Russian cars, given that rising incomes in middle-class households and the increased presence of foreign manufacturers have increased demand for better quality cars, a trend that has put Russian-owned producers at a disadvantage compared to foreign car manufacturers.

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