Russian Foreign Car Sales Growth Slows in September; Forecast Worsens

Foreign car sales in Russia rose by 22% year-on-year in September to 179,423 units, according to data from the Association of European Businesses in the Russian Federation (AEB). This represented the weakest gain in over 20 months and is a clear indicator that the global financial crisis is starting to have an impact, leading to a drop in consumer demand for cars. Sales growth for the year to date (YTD) also slowed, albeit to a still-impressive 40% y/y to 1,611,840 units, compared with 1,152,448 units in the same period last year; this is nevertheless a marked slowdown from the 60%-plus rises of recent times.

At the brand level, Toyota took top spot in September with a 66% y/y gain to 18,233 units, some way ahead of General Motors’ (GM) Chevrolet, whose sales fell 2% y/y to 16,353 units (including the GM AvtoVAZ joint venture). Hyundai came third with 16,110 units, compared with 15,208 last year, a 6% rise. Nissan’s September sales surged 53% y/y to 14,372 units, putting it in fourth spot, followed by Ford, whose sales fell 13% y/y to 12,600 units from 14,555 units in the same month last year. In the YTD, GM's Chevrolet brand leads the way with 175,798 units, a 34% rise from 131,653 units in the same period last year. Hyundai is in second place, having overtaken both Ford and Toyota, with 159,392 units, an impressive 67% hike compared with just 95,685 units a year earlier. Toyota is third, its sales growth having slowed to 32% y/y to 145,388 units. Ford has slipped from second to fourth place in the YTD period, recording 141,414 units, growth of just 17% compared with 120,413 units in the same period of 2007. Nissan came fifth with 118,800 units, up from 81,832 units last year, a 45% y/y rise in volumes. Ford continued to boast the top-selling model, however, with the Focus selling 68,110 units in the January-September period. The Chevrolet Lacetti came second with 61,863 cars sold, and the Renault Logan ranked third with 58,547 cars sold.

Outlook and Implications

September's sales rise belies the turmoil in the market and several manufacturers in the country are scaling back their sales targets as the global financial crisis starts to have an impact. Russia's stock market has lost over 60% of its value in recent weeks and the knock-on effects of this have hit the auto industry directly, with Russian Machines having ceded its 20% stake in Magna International earlier in the week (see Russia: 6 October 2008: Magna's Russian Partner Gives Up Stake to Creditors). This was followed by both Toyota and Ford slashing their sales expectations for the market (see Russia: October 2008: Russian Car Market Growth to Slow as Toyota and Ford Slash Targets). The head of Ford Europe, John Fleming, said that his company’s growth in the Russian car market has now slowed to 5% from the 25%-plus rates witnessed earlier in the year as the credit crisis hits the country’s economy. Fleming's comments came after Toyota Europe's executive vice-president also slashed his company’s Russian growth forecast last week (see France: 3 October 2008: Paris Motor Show 2008: Global Economic Woes Casts Gloom over Auto Industry in Paris), from 15% to 5% in 2009. Fleming also said that the market could stagnate next year. Reports have also cited Jean-Michel Jalinier, the head of Renault's unit in Russia, as saying that its dealers are indicating a sharp slowdown in the market. Furthermore, the chief operating officer (COO) of GM, Fritz Henderson, remarked at the Paris Motor Show (France) that automakers are "not going to continue seeing growth rates of 25% to 35%" as they have in the past.

The stock market crash comes as the global banking crisis leads to tightening credit conditions from lenders, hitting car loans particularly hard. This factor is already hurting sales in the U.S. and European markets, and is also likely to drive down sales growth further in Russia. The negative impact on consumer confidence has left showrooms empty and the decline is expected to accelerate in the final quarter.

The short-to-medium-term impact on the Russian market is not immediately apparent in percentage terms—as with all markets, the sheer scale and magnitude of the current financial crisis is still being understood and the extent of the slowdown is not immediately apparent from September's figures. This is because September benefited from two extra working days compared with the same month in 2007, equating to a boost of around 4.5% per day; the growth rate on a like-for-like basis has already slowed to around 13%.

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