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Customer LoginsRussian light-vehicle sales rise in November for first time since December 2014
Russia's light-vehicle market posted its first increase in nearly two years in November, providing a first sign of recovery for a market decimated by the country's macroeconomic downturn.
IHS Markit Perspective
- Significance: The Russian light vehicle market has posted its first increase in sales volumes since December 2014, with a 0.6% year-on-year (y/y) rise in sales during November to 132,346 units, according to the latest data from the Association of European Businesses (AEB).
- Implications: Although the y/y gain reflected extremely low sales in 2015, rather than any fundamental macroeconomic improvement, it points the way to an anticipated recovery, set to begin in 2017 according to IHS Automotive's latest forecast.
- Outlook: For the full year, IHS Automotive predicts light-vehicle sales of 1.4 million units, rising to 1.5 million units in 2017.
The Russian light-vehicle market finally provided good news for OEMs and dealers with its first year-on-year (y/y) rise in sales since December 2014: a 0.6% y/y uplift to 132,346 units in November, according to the latest vehicle sales data from the Association of European Businesses (AEB). This helped mildly moderate the rate of decline from previous months in the year to date (YTD), with a 12.0% y/y slide to 1,279,987 units. Commenting on the improvement in November, the chairman of the AEB's vehicle manufacturers' committee, Joerg Schreiber, said, "November sales produce the first month with a positive year-on-year result in almost two years. It is good to be able to say such a thing after all, but it is far too early to read a trend turnaround into this. For now, all eyes are on December, which has the potential to demonstrate that the market continues to move in the right direction."
One of the biggest beneficiaries of the improvement in the sales environment during November was Russia's leading OEM, AvtoVAZ. The company, under Renault's control and ownership, has undertaken a unprecedented period of investment in new models in the last 18 months, yielding the new Vesta sedan and the XRAY crossover - and the firm is starting to feel the benefit of these new models in terms of sales.
In November AvtoVAZ's Lada brand sales rose by 18% y/y to 25,507 units, which helped improve the rate of decline to 3% y/y to 238,666 units for the YTD. Lada had the best-selling car during November. Granta sales totalled 8,516 units, while the new Vesta posted sales of 5,661, up from 1,748 when the model had just been launched last year, with production and supplies just coming on stream.
Hyundai got the upper hand in its ongoing battle with sister brand Kia to be Russia's second best-selling brand in November. Hyundai recorded a 4% y/y uplift during the month with sales of 15,779 units, lifting its YTD decline to 12% y/y and 131,207 units. This meant the brand performed exactly in line with the overall market in the first 11 months of the market, while taking the third place in the YTD table behind Kia. Hyundai's sales in November benefited from the recent launch of the Creta SUV-B segment car, providing 4,814 units. Kia was the third best-selling brand in November with volumes up 4% y/y to 14,651 units, while its sales were down 8% for the first 11 months of the year to 136,374 units.
Other strong performers during the month were Renault. Its sales climbed 13% y/y to 11,631 units in November, although without the new Renault Captur adding 2,327 units the trend would have been negative. In the YTD Renault sales fell 5% y/y to 103,465 units.
GAZ, the ninth best-selling brand during the month, registered an 18% y/y uplift to 5,132 units on strong LCV sales, which helped lift the brand's sales by 5% in the YTD to 48,286 units. The biggest loser in the top 10 during November was Nissan, with sales down 18% y/y to 5,998 units, although this was at least an improvement from their 23% y/y decline during the first 11 months of the year.
Outlook and implications
While the 0.6% y/y uplift in monthly light-vehicle sales would be unremarkable in most markets, in Russia it follows 23 straight monthly declines. Although hardly a sign of a sustained improvement, the uptick is the much needed first sign of positivity after months of consecutive falls and poor macroeconomic indicators, which have undermined consumer confidence, while lending criteria also remain very tight. As well as the new Vesta and XRAY the market has also seen a number of other key new models in recent months, including the Hyundai Creta, that should help bring private buyers back into showrooms.
In a wider macro context, 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. It does not seem premature to say the Russian economy is about to turn, since the magnitude of y/y downturns in high-frequency data has diminished. GDP in the first quarter of 2016 (down 1.2% y/y) and the second quarter (down 0.6%) as well as higher-frequency data showed the rate of contraction has been slowing. The flash estimate of GDP in the third quarter put the y/y decline at 0.4%. The economics ministry has estimated that the economy actually grew quarter on quarter in July-September, by 0.1%.
Several factors are at work. Oil prices have regained some ground, and the government is pursuing its anticrisis programme. Additionally, the economy has somewhat adapted to the new conditions. The weakened rouble has boosted the competitiveness of Russian manufacturing. While still facing some difficulties in borrowing from Western capital markets, Russian entities have turned elsewhere. Recently, even the sovereign has successfully issued eurobonds. We now have GDP contracting a further 0.6% in 2016. A modest resumption of growth is seen in 2017, but with only a 0.8% increase. The 2016 downturn has been modestly improved in our most recent forecast, given the estimated performance in the first three quarters and new high-frequency data. In terms of the 2016 full-year sales forecast, IHS Automotive predicts 1.4 million units, with a small recovery beginning in 2017, when 1.5 million units are forecast.
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.