Russian Automotive Market
Ernst & Young
Russian Economy
The Russian economy grew significantly in 2007. Foreign direct investment increased by over 50%, a substantial indicator even in comparison with the record figures in 2006. GDP growth also exceeded the most optimistic expectations, while consumer incomes and wages continue to rise both in nominal and real terms. Perhaps the single point of failure was accelerating inflation, which will frustrate the government's plans to lower credit rates over the next two to three years. Although this has resulted in the revision of several economic growth indicators, the general mid-term and long-term outlook remains positive.
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Russian automotive market in a global context
"Russian motorization" continues to break all records and surpass the most enthusiastic forecasts of auto industry analysts. This has to do, in iarge part, with the stable level of personal income, auto loan schemes acceptable for the majority of the population, expansion of the regional dealer network, the move away from outdated Russian models to more expensive, environmentally friendly and safer vehicles, and the industrial assembly of low-budget and/ or competitive foreign models in the Russian Federation. All of this promotes a renewal of the motor-vehicle pool, which has an average age, according to various estimates, of 10 to 12 years.
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This surge in motorization has made Russia third in Europe and sixth in the world with respect to car sales (in 2006, Russia was fifth in Europe and eighth in the world). Combined sales in Central and Eastern Europe were 5% lower than in Russia. Traditionally leading markets such as the US, Germany, and Japan showed a negative dynamic in car sales in 2007.
2007 |
Population
(million)
|
Passenger
car parc
(million)
|
Car density
(car per
1000
people) |
Germany |
82.2 |
46.81 |
565 |
UK |
61.0 |
31.34 |
521 |
US |
302.8 |
136.01 |
450 |
Czech Republic |
10.2 |
4.31 |
424 |
Poland |
38.1 |
14.21 |
369 |
South Korea |
48.9 |
9.65 |
246 |
Russia |
142.3 |
26.79 |
188 |
Brazil |
189.4 |
19.80 |
107 |
Turkey |
75.1 |
6.24 |
85 |
China |
1,322.1 |
21.43 |
16 |
India |
1,135.6 |
12.06 |
9 |
Passenger car market
According to data, in 2007 the Russian passenger car market grew by 36%, with more than 2.4 million vehicles sold. Foreign cars accounted for over 61 % of the sales increase above the level of 2006 (620,000 cars). Russian auto manufacturers continue to fight for their share of the market, which shrank by 10% of the total from 2006. As in previous years, AVTOVAZ enjoyed the highest demand, accounting for 28.5% of all auto sales.
Passenger car market sales are estimated at over US$50 billion in 2007, a growth of more than 57% from 2006. Russians opted for foreign brands (both imported and locally produced), spending more than US$40 billion, and almost US$6 billion was spent on Russian brands. Demand for second-hand imports is still high.
Cars in Classes Band C have shown stable growth in Russia, accounting for over half of all sales, As before, the leaders in Class B were classic and well-known AVTOVAZ models, whose territory is now being encroached on by low-budget cars from Renault and GM. In Class C, the leaders were LADA Priora and the Russian Ford Focus.
Car density grew by 8 vehicles per 1,000 in 2007 to reach 188. We expect that by 2012 car density will reach a level of 300. The number of new contracts signed last year has caused some established OEMs to change their plans for Russia.
By 2009-201 0 the number of locally assembled foreign cars will grow significantly. We estimate substantial car parc growth by 2015 with a number of cars surpassing 50 million units.
OEMs from Asia continue to dominate the Russian market, but last year FIAT appeared again and won considerable market share. Europeans are still holding their share, but Russians show more preferences for cars priced in US dollars.
The shift in consumer preferences towards more expensive and comfortable cars continues the trend of previous years. However, budget cars are still popular with Russians, especially outside the large cities. Competition in the price segment up to US$10,000 is fairly limited, since classic AVTOVAZ models are the favorites in that segment There is intense competition between domestic and foreign producers of Class B cars imported or produced in Russia in the segment from US$10,000 to US$15,000. In the US$15,000 to US$40,000 price segment, Class Cs and SUVs showed the best sales - substantially surpassing the growth rates of the overall passenger car market.
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Commercial vehicle market
The growth trend seen on the market in 2007 will continue in the midterm perspective, The rates of growth, however, will gradually decline, As compared to 2006, in 2007 Russian truck manufacturers produced more light commercial vehicles and pickups (an increase of 7.1 %), medium-duty vehicles (nearly 22%), and heavy trucks (over 25%). Overall production of Russian and foreign vehicles increased by 15.8%, which is clearly insufficient when viewed against the output of the Russian heavy truck market.
Bus market
No significant changes in the balance between Russian bus manufacturers were observed in 2007. It was only because foreign small-class buses went into production in Russia that the market was able to grow 8.6% from 2006. The bus division "Avtobusy" of the GAZ Group, accounting for some 27% of the Russian bus market, remains the market leader.
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