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Customer LoginsRussian light-vehicle market falls 12.7% y/y in June
The Russian light-vehicle market has posted another disappointing set of results in June despite some slow signs of recovery in other areas of the economy.
IHS Automotive Perspective
- Significance: The Russian light-vehicle market posted another highly disappointing result in June with a 12.7% y/y fall in sales to 126,333 units.
- Implications: This was a disappointing result for OEMs, suppliers and dealers alike as the general feeling was that the market would start to show at least some concerted moderation in the double-digit declines that have become a feature of the market.
- Outlook: The outlook does not appear to be improving particularly from a sales base that is already at a low level and which a highly imperfect set of macro conditions has undermined confidence and buying power. For 2016 IHS Automotive's current forecast.
The Russian light-vehicle market posted another disappointing and accelerated fall in sales in June as sales fell by 12.7% year on year (y/y) to 126,333 units, according to the latest data released by the Association of European Businesses (AEB). This left the year to date (YTD) at 672,140 units which was a 14.1% y/y decline. This can be seen as somewhat disappointing as the tough macro environment continues to erode confidence and buying power. Given that the Russian market had its first single-digit percentage decline in sales April in over a year, when the market fell by 8.5% and some signs in the wider economy of improvement, such as rising truck sales, the market has yet to show any kind of concerted momentum towards lowering monthly sales declines, Indeed the monthly decline in April may have been in the single digits but it also the single lowest individual monthly sales tally in a decade. The head of the AEB's vehicle manufacturers' committee Joerg Schreiber said, "June sales did little to improve the cumulative result of the market in the first half of the year. Total market volume continued to erode at double-digit pace, faster than anticipated at the beginning of the year."
Lada's position as the market's leading brand is still safe as it has almost twice the sales volume as its nearest rival Kia. However it lost out in June by recording a bigger than average drop in the market with a 16% y/y decline in monthly sales to 22,229 units. This was borne out but Lada's best selling model, the Granta, falling to third in the sales table behind the Hyundai Solaris and Kia Rio. In fact, Granta sales almost halved to 7,219 units, although this result was somewhat exaggerated as a result of the Granta being the main beneficiary of the Russian scrappage scheme during this point last year. However, Lada's YTD sales tally just remained ahead of the overall YTD figure, with a 12% y/y fall to 124,353 units. Kia again outperformed the overall market to retain second spot overall, with sales falling by 8% during the month to 12,780 units, while YTD sales also matched that decline with an 8% y/y fall to 76,215 units. Hyundai enjoyed a very strong June, bolstered by discounts and incentives, with sales down 2% to 12,001 units. Another standout performer was fourth-placed Renault which actually managed to generate positive growth of 1% to 10,075 units thanks to comparatively strong sales of the Duster and Sandero. However, Nissan down in eighth place on the overall sales list posted a terrible result in June with a 33% y/y fall to 6,009 units, with sales of the Terrano falling.
Outlook and implications
Just when it appeared there might be signs of a few small green shoots of recovery starting to influence the Russian market, hopes were extinguished with sales data like June's results. While there appear to be positive signs in other areas of the economy, such as a mild recovery in truck sales, it appears that the passenger and light commercial vehicle markets remain highly fragile. All the Russian government's incentive schemes such as scrappage and subsidised loans remain in place, but it appears that even with such incentives consumers simply do not have the confidence to invest in big-ticket items in large numbers. The Russian economy continues to contract, but the pace has slowed as oil prices and the rouble regained some lost ground, and the economy has adapted to a degree to the new conditions. It is premature to say the Russian economy has turned the corner, but the magnitude of y/y downturns in high-frequency data has diminished, although not in the car industry. Both the flash estimate of GDP in the first quarter of 2016 (down 1.2% y/y) and higher-frequency data show that the rate of contraction is slowing. However, the 3.7% decline in GDP in 2015 as a whole, the base comparison is lower. Oil prices have regained some ground and the government is pursuing its anti-crisis programme. The weakened rouble has boosted the competitiveness of Russian manufacturing, including in the domestic market vis-à-vis imports. While still facing difficulties in borrowing from Western capital markets, Russian entities have turned elsewhere, particularly China. IHS now has GDP contracting a further 1.6% in 2016. A modest resumption of growth is expected in 2017, with a 0.5% increase. In terms of the effect this will have on the light-vehicle market we should see some stabilisation at some point soon, although exactly when that will be is hard to say. Other macro data may be improving but Russians are still taking a very conservative attitude on how they spend and this continues to be felt at showrooms all over the country. For the full year IHS Automotive currently forecasts light-vehicle sales of 1,432,415 units, down from 1,608,298 units.
About this article
The above article is from IHS Automotive Same-Day Analysis of automotive news, events and trends, and is a deliverable of the World Markets Automotive Service. The service averages thirty stories per day and also provides competitor and country intelligence. Get a free trial.