Vehicle sales in Russia have been on the rebound thanks to ongoing government support in the form of the scrappage programme. Car sales in June rose 45% year-over-year (y-o-y). Total vehicle sales reached 174,838 units during the month, according to the Association of European Businesses. The big jump marked yet another consecutive month of solid sales growth. In May, Russian car sales climbed 31% y-oy, although sales decline marginally compared with April.
Sales have been recovering since April on the back of the vehicle junk scheme launched in March 2009. That programme gives buyers RUB50,000 if they trade in a car over 10 years old. The government launched the scheme with the aim that it would result in 200,000 new car sales this year. It launched the second phase of the scheme at the end of June 2010, pledging an additional RUB10.5bn (US$340mn) to the programme. Consequently, BMI expects the bounce in sales to continue, with total sales nearing 1.6mn units this year.
Domestic carmakers have benefited from the car scrappage scheme, which applies only to purchases of Russian-produced vehicles. In April, nine of the top 10 selling brands in Russia were locally produced. The biggest winner so far has been AvtoVAZ, which makes the Lada. AvtoVAZ’s April sales reportedly surged 54% y-o-y, to 34,136 units. So far this year, domestic brands appear to be gaining on their foreign rivals. Based on sales in the first four months, GAZ and UAZ have returned to growth, while General Motors Company (GM), VW and Hyundai Motor were still posting declines. Any gains recorded by Russian brands should be viewed positively, especially when considering that total sales in the January to April 2010 period were down 13% from the 456,179 units sold in the same period in 2009. The srappage scheme has also provided a boost to auto output. In the first five months of 2010, vehicle production rose 65% over the same period a year ago to 381,560 units, Reuters reported, citing figures from industry body ASM Holding. However, better availability of auto financing has also played a factor. At the same time, we are cognizant of the fact that after the disastrous year that was 2009, output really has nowhere to go but up.
Overall, sales will be tied to economic conditions. In this regard, there have been some positive developments recently. The availability of credit has been improving. ZAO Toyota Bank expects that by the end of the year, nearly half of all purchases will be financed with loans. If these estimates pan out, then the auto loan market is set to expand 19% y-o-y in 2010. On the negative side, though, are the fundamentals weaknesses of Russia’s economy, which include low productivity, corruption and weak infrastructure. A demographic decline may also worry car dealers in the long term, as the population ages.

Report Highlights

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Executive Summary 5
SWOT Analysis 7
Russia Auto Industry SWOT 7
Russia Political SWOT 8
Russia Economic SWOT 9
Russia Business Environment SWOT 10
Regional Overview 11
BMI Stands By Domestic Demand Side Story View For Emerging Europe 11
Standing By The Domestic Demand Side Story 12
Business Environment Ratings 15
Table: Western Central And Eastern Europe Business Environment Ratings 19
Industry Forecast Scenario 20
Production And Sales 20
Table: Russia Automotive Production 20
Table: Russia Automotive Sales 20
Commercial Vehicles 23
Trade 25
Table: Trade 25
Table: Russia – Economic Activity 29
Competitive Landscape 30
Regulation 32
Manufacturers – Foreign Brands 36
Table: Russia – Current And Planned Investment By Foreign Automakers 36
Table: Fiat – Subsidiaries In Russia 39
Manufacturers 45
Commercial Vehicles 49
Table: New Truck Imports By Brand 53
Suppliers 54
Company Monitor 61
PSA Peugeot Citroën 61
Financial Woes 61
Focus On Faurecia 62
Merger Opportunity 63
Eye On Eastern Europe 64
Company Profiles 66
AvtoVaz 66
Kamaz 69
RusPromAvto 71
Kia Motors 73
Renault 74
Sollers 75
Taganrog Automobile Plant 78
Ford Motor 79
Toyota Motor 81
General Motors Company (GM) 82
Country Snapshot: Russia Demographic Data 84
Section 1: Population 84
Table: Demographic Indicators, 2005-2030 84
Table: Rural/Urban Breakdown, 2005-2030 85
Section 2: Education And Healthcare 85
Table: Education, 2002-2005 85
Table: Vital Statistics, 2005-2030 85
Section 3: Labour Market And Spending Power 86
Table: Employment Indicators, 2001-2006 86
Table: Consumer Expenditure, 2000-2012 (US$) 86
Table: Average Annual Wages, 2000-2006 87
BMI Methodology 88
How We Generate Our Industry Forecasts 88
Sources 89
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