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Foreign Passenger Car Sales in Russia Up 40% in April
22 May 08
Foreign carmakers continue to dominate sales growth in the Russian passenger car market
Global Insight Perspective | | Significance | Foreign car sales in Russia continued to outstrip the domestic carmakers as sales climbed 40% in April to 200,538 units, while in the year-to-date period sales rose by 49% rose to 655,393 units. | Implications | Foreign car brands are increasing their stranglehold in the Russian market, and this pattern is set to continue as further investment is made by foreign carmakers in Russian production facilities to beat import tariffs. | Outlook | The domestic carmakers, mainly represented by AvtoVAZ's Lada brand, are hidebound by ancient vehicle technology and a lack of investment to develop new models. However, the recently completed deal for Renault to take a 25% stake in AvtoVAZ may allow the company to develop a range of vehicles to challenge the dominance of the foreign carmakers. |
Foreign Carmakers' Sales Growth Continues in Russia Foreign car sales in Russia continued to display accelerated growth in April in Europe's fastest growing market as they rose by 40% year-on-year (y/y) to 200,538 units, according to figures complied by the European Businesses in the Russian Federation (AEB). General Motors (GM) led the way with its sales in April as the biggest selling foreign carmaker, with sales of 23,078 units, which included the sales of vehicles built as part of its joint venture (JV) with AvtoVAZ. The AEB also included its year-to-date (YTD) figures for the first four months of the calendar year between January and April, with sales actually increasing by 49% y/y in comparison to the equivalent period in 2007, which saw sales rise to 655,393 units According to the AEB's data the Chevrolet Lacetti was the best-selling foreign passenger car in Russia in the January to April period with 28,531 units. This meant that the Lacetti has overtaken the Focus which was the best-seller throughout 2007. The Focus slipped to second in the January to April sales charts with 27,577 units, while the Renault Logan was third with 26,422 units. In terms of manufacturers GM led the way in the YTD measure with sales of 82,206 units in the first four months of the year, in comparison to the figure of 53,835 units last year. Hyundai was second and posted the most impressive growth, with sales more than doubling to 65,458 units up from 31,445 units last year. However Ford only experienced nominal growth in comparison with sales rising to 59,700 units in comparison to 54,714 units last year, due to slower growth for Focus sales. Top ten foreign brand by sales in Russia | | | YTD2007 | YTD2006 | % Change | Chevrolet | 82,206 | 53,835 | 52.7 | Hyundai | 65,458 | 31,445 | 104.1 | Ford | 59,700 | 54,714 | 9.1 | Toyota | 52,734 | 45,251 | 16.5 | Nissan | 49,475 | 29,410 | 68.2 | Renault | 35,352 | 28,162 | 25.5 | Opel | 33,749 | 14,833 | 155.2 | Daewoo | 33,093 | 24,958 | 32.5 | Mitsubishi | 32,746 | 20,750 | 57.8 | Kia | 31,962 | 19,868 | 60.8 | Source: AEB |
Outlook and Implications Russia became the third biggest passenger car market in Europe after Germany and Italy in 2007, and it is set to become the continent's biggest by 2013, according to Global Insight data. The market is going from strength to strength as a result of accelerated economic growth, largely as a result of the spiralling commodity process which the country is benefiting from as a result of its extensive gas and oil reserves. These improved economic conditions and a more diverse product offering positioned in the entry-level segments has helped inflate new car sales in Russia but foreign brands have benefited from the majority of the sales growth. At the same time they are further consolidating their position in the market by tirelessly expanding their commercial presence outside Moscow and St Petersburg while proposing attractive auto loan schemes. With more foreign carmakers building capacity in Russia, local brands will continue to find it difficult to recapture market share in the medium term. By 2010, Volkswagen (VW), Toyota, GM, Nissan and Suzuki will have completed construction of their new plants in Russia, with PSA and Mitsubishi signing a deal to collaborate on a JV at the formers new plant in Kaluga which will on stream in 2011 (see Russia: 20 May 2008: PSA Peugeot-Citroën and Mitsubishi Sign Russian Manufacturing JV Agreement). Foreign brands will continue to propose superior and more diverse model ranges to Russian customers until production of new economical models tailored to the local market can begin from 2009. Global Insight data showed that the Russian passenger car market increased by 30.4% y/y in 2007 to 2.36 million units, and while local automaker AvtoVAZ led the way in volume terms with 657,000 units, this figure actually represented a 7.4% decline on the company's 2006 sales figures. This contrasts starkly with the sales growth recorded by the next three manufacturers in the 2007 best-sellers table of GM, Hyundai and Ford, which respectively posted y/y gains of 97.0%, 45.9% and 41.6%. However, while Russian carmakers have been hamstrung since the fall of Communism by a lack of investment to fund new model development and an increasingly ancient model range, this looks set to change. AvtoVAZ's recently announced tie-up with Renault (see Russia: 4 March 2008: Renault Confirms US$1.17 bil. Purchase of AvtoVAZ Stake) should allow the company to develop a modern range of Lada-branded passenger cars based on Renault technology that should allow it to defend its shrinking market share.
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