Russia’s market for new light vehicles: Outlook and analysis for the first half of 2011

20 July 2011
PwC office, Moscow

On July 20, 2011 PwC presented a traditional review – ‘Russia’s market for new light vehicles: Outlook and analysis’ for the first half of 2011.

In the first six months of 2011, Russia outrun all the largest automotive markets of the world with the most significant light vehicles sales growth (by 57% in unit terms, India – 16%, USA – 13%, Germany– 10%), and by 85% in monetary terms as compared to the same period in 2010.

There is a great deal of demand for budget foreign brands. This positive market development was driven by the use of the scrappage programme and subsidised loans, the availability of car loans, the strengthened Russian rouble, the growth of the national economy and a lower unemployment rate. At the same time, growth of this magnitude can partially be explained by the 'low base' effect in the first quarter of 2010. Later on, we expect that growth rates will slow down and believe that light vehicle sales could reach 2.5 million units this year, which is 90% of the pre-crisis level.

Growth in the Russian brands segment (32% – in unit terms and 52% – in monetary terms) is, first and foremost, due to the scrappage programme, although their market share is going down.

During the past six months of 2011, sales of imported new foreign cars grew by 60% in unit terms and by 82% in monetary terms. This was, among other things, driven by the strengthened Russian rouble.

The share of foreign cars manufactured in Russia has been growing constantly in quantitative terms since 2002 and reached 38% in the first six months of 2011. We expect this trend to persist because new plants continue to build up production.

The greatest decline in sales during the downturn was observed in the regions, but they are now demonstrating better recovery rates than Moscow and St Petersburg.

Greatly increased demand for cars, state incentive programmes and OEM investments in new capacities triggered noticeable growth in output. For the first six months of 2011, 815,000 light cars were manufactured, which is 67% more than for the same period in 2010. 2011 could well become a record year in terms of light vehicle production in Russia; output could reach approximately 1.7 million vehicles a year. If the global economy is stable, production could exceed 3 million vehicles by 2016 as a result of general market growth and the increasing share of cars assembled in Russia.

Due to aggressive growth in domestic production of foreign brands, their sales grew by 77% in unit terms and by 104% in monetary terms. Just as we expected, that segment has been demonstrating the strongest growth both in unit and monetary terms.

In this economy, automotive market players can expect long-term growth but should also be ready to adjust to possible changes.

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