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Customer LoginsRussian light-vehicle sales fall again with a 10.9% y/y drop in September
The downturn in the Russian market continues, with any recovery still appearing somewhat in the distance and very mild in its nature.
IHS Markit Perspective
- Significance: The Russian light-vehicle market posted another accelerated decline with a 10.9% y/y fall in September as the ongoing contraction which has been taking place for more than two years now continued.
- Implications: More optimistic observers of the Russian market had hoped that the extremely low base level would see a recovery in monthly sales volumes. However with the LV market in 2015 less than half the peak sales number in 2008 of 2.96 million units, a further fall is forecast this year as the macro environment remains bleak despite some small recent signs of recovery.
- Outlook: There remains little immediate prospect of a concerted recovery as energy prices remain in the low range which is keeping the rouble low, while sanctions continue to limit the country's ability to carry out international trade. For the full year IHS Automotive has Russian light vehicle sales at 1.42 million units, down from 1.61 million units in 2015.
The Russian light-vehicle market stumbled once more in September, with no sign of the recovery that was anticipated by some observers in the second half of 2016. According to the latest set of sales data released by the Association of European Businesses (AEB), the Russian market fell by 10.9% or 15,375 units year on year (y/y) during the month to 125,568 units. In the year to date (YTD), which equated to the first three-quarters of the year, sales fell by 14.4% y/y to 1,102,932 units. Commenting on the development of the market in the first three quarters of the year the head of the AEB's vehicle manufacturer's committee Joerg Schreiber said, "With nine months of the year completed, the market has finally crossed the 1 million threshold. This is maybe not quite what we had hoped for at this point, but more than some pessimists had predicted for the whole year. Pace of sales in the remaining months of the year will depend on whether customers believe that state-sponsored purchase incentives like trade-in will run out soon or not: Those who see a deadline looming may want to accelerate their purchase decision. And if this is the thinking of the majority, new car demand will go up in the short term."
Market leader AvtoVAZ's Lada brand enjoyed a strong month during September, in which it significantly outperformed the overall market. with a 5% y/y uplift in sales volumes to 22,837 units, bolstered by strong sales of the new Vesta and the X-RAY SUV. The new cars are helping to consolidate Lada's position at the top of the Russian brand sales charts, but may not be having quite the impact that AvtoVAZ and its owners would have hoped if market conditions were more favourable. However, the new models will enable the company to leverage the recovery in the market that is due to start, albeit in mild fashion, from next year. The entry-level Granta also performed significantly better than has been the case in recent months to take second place in the market during September with sales of 7,815 units. YTD, Lada sales were down 7% to 189,952 units. Hyundai was second in the brand list with sales of 14,200 units, 6% y/y down from 15,106 units. The YTD figure was down by 15% y/y to 101,238 units. Hyundai did well with its September performance, considering the enormous drop-off in sales it experienced from its best-selling Solaris, which while remaining third overall in the best-sellers list, posted a fall of over 4,500 units to 6,498 units during the month. This was made up for by the launch of the new Creta SUV, which took fourth spot overall behind the Solaris. YTD Hyundai remained behind Kia, which was third in September. Kia's YTD sales stand at 106,708 units, a fall of 11%. Renault also enjoyed a positive month in fourth spot for September with sales rising by 1% y/y to 10,474 units to at least create a positive trend, and it also took fourth in the YTD with a 7% y/y decline to 80,822 units. The best-selling model during September was the Duster, which sold the same amount as last year, the brand was also bolstered by the recent launch of the Captur, which was the 13th best-seller in Russia during the month behind the Logan and Sandero in 11th and 12th. Toyota put in a very strong performance in September to take fifth spot. Its sales rose 18% y/y to 8,419 units, propelled by the Camry and locally built RAV4, which added almost 2,000 units as a result of local production starting earlier this year to post sales of 2,852 units for tenth spot overall, one place behind the Camry.
Outlook and implications
The Russian economy still lacks the fundamentals to support any sales growth, despite the market almost halving in volumes from the figure of 2.94 million units that was posted as recently as 2012 (although this number is just below the outright peak recorded in 2008). There have been a few signs of recent improvement that should support the mild recovery IHS Automotive expects in 2017. The Russian economy continued to contract through the first half of 2016, but the pace has slowed as oil prices and the rouble have regained some lost ground, and the economy has adapted somewhat to new conditions. However, it is premature to say the Russian economy has turned the corner, despite the magnitude of y/y downturns in high-frequency data diminishing. Both GDP in the first quarter of 2016 (down 1.2% y/y) and the second quarter (-0.6%) as well as higher-frequency data show that the rate of contraction is slowing. There are several factors at work. First, given the 3.7% decline in GDP in 2015, the base of statistical comparison is lower. Oil prices have regained some ground, and the government is pursuing its anti-crisis programme. Additionally, the economy has somewhat adapted to the new conditions. The weakened rouble has boosted the competitiveness of Russian manufacturing, including in the domestic market vis-à-vis imports. In the case of the food industry, domestic producers are benefiting from the embargo on food imports from the EU. While still facing difficulties in borrowing from Western capital markets, Russian entities have turned elsewhere, particularly China. We now have GDP contracting a further 0.9% in 2016. A modest resumption of growth is seen in 2017, but with only a 0.7% increase. These rates have been improved by several tenths of a percentage point in the most recent monthly update given the new information on performance in the second quarter. For the full year IHS Automotive forecasts a contraction of 11.9% y/y to 1.42 million units which would indicate a continuation of the mild moderation in sales contraction in the final quarter of the year.
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.