Customer Logins
Obtain the data you need to make the most informed decisions by accessing our extensive portfolio of information, analytics, and expertise. Sign in to the product or service center of your choice.
Customer LoginsSame-Day Analysis: Despite strong 2015, performance premium car brand will not lead recovery in Russian passenger car market
Currency devaluation has been a relative stimulus to premium car sales in Russia in 2015 compared to the wider market, but IHS automotive does not expect the trend to last.
IHS Automotive Perspective
- Significance: The premium carmakers managed to outperform the Russian passenger car market which slumped 36% y/y in 2015, with many OEMs managing to record positive results for the year. However, in the longer term IHS expects the mid-market brands to lead the recovery.
- Implications: The premiums' performance and the forecast accelerated recovery in comparison to the wider market can be ascribed to a number of factors. The collapse in the currency and the Russian stock market has led many relatively wealthy individuals to look to convert cash and shares into physical assets and it seems the wealthy in Russia still have the cash and confidence to make purchases
- Outlook: In the longer term we expect these factors will ease and while the wider marker will recover between 2015 and 2020 at a rate of 54% growth to 2.24 million units, by comparison premium and ultra premium brands will only rise 33% to 186,000 units.
Although the Russian passenger car market posted a 36.1% year-on-year (y/y) decline in 2015 to 1,487,973 units, the premium and ultra premium brands fared much better. Even as the Russian economy slumped further into recession in 2015, some premium automotive brands managed to record positive sales results. Porsche managed the strongest result during the year with a 12% y/y uplift in 2015 to 5,290 units, thanks to strong sales of its sport utility vehicle (SUV) ranges, comprising the Cayenne and the Macan. Lexus managed a 6% y/y uplift to 20,224 units, Rolls Royce posted a 1% y/y rise in its sales volumes according to the company, while Bentley also reported that its sales in Russia were "growing rapidly".
Despite the big-three volume German brands failing to record positive results during the year, they at least significantly outperformed the mid-market and budget brands in the market, and therefore increased their relative share of the Russian market. Mercedes-Benz continues to manage the impressive trick of being the only one of the German big three to not have an assembly operation in Russia, while being the best-selling of the three brands, limiting its sales decline to just 15% y/y during the year to 41,614 units, while BMW's sales fell by 23% y/y to 27,486 units and Audi witnessed a 24.6% y/y slump to 25,650 units. Mercedes-Benz has long harboured ambitions to establish an assembly facility that would further bolster its presence and performance in Russia, with CEO Dieter Zetsche confirming in an interview with Automotive News Europe (ANE) at the end of last year that his company was still looking at options. Audi has some production at the VW Group's Kaluga site while BMW has a long-standing contract manufacturing arrangement with local assembler Avtotor which builds the 3-, 5- and 7-Series as well as the X1, X3, X4, X5 and X6. In addition the high-end and high-performance sub-brands of the big three also recorded highly positive sales results in 2015. According to the Autostat info agency, Mercedes-Benz's AMG unit 2,432 cars (+21%), BMW's M division sold 517 cars (+19%), and Audi's Quattro unit 273 cars (-13%).
Outlook and implications
Given the extremely poor performance of the overall Russian passenger car market in 2015, the relatively strong performance of the premium brands may seem somewhat incongruous. But it seems there are a number of economic and demographic factors at play that is bolstering the performance of premium nameplates in comparison to mid-market competitors. The key to the strong performance, particularly with regards to the ultra-premium brands, would appear to be partly down to the weakness of the Russian currency. The rouble has more than halved in value against the US dollar since the middle of 2014 and the currency recently slumped to a record low of RUB78:USD1. In a Reuters report earlier this year Maria Malinskaya, showroom head at the Rolf car dealership group, said some premium models were now two or three times cheaper in roubles than in US dollars. As a result some wealthier Russians have looked to convert their cash or falling shareholdings into physical assets such as premium cars, which tend to depreciate at a slower rate in Russia anyway than would be the case in Europe. This picture of the Russian automotive bear market is unlikely to change any time soon, given the well-documented macroeconomic stresses the country is experiencing. In addition to the collapsing value of the rouble, consumer confidence among normal Russians is all very low levels and when combined with high unemployment and rising inflation the buying environment is understandably flat. However, although the negative currency impact appears to have had a relatively positive effect on Russian premium sales in 2015, we do not expect this trend to be maintained in the long term. IHS Automotive is forecasting a slow and painful recovery for the general passenger car market, with sales rising between by 54% y/y between 2015 and 2020 to 2.24 million units, despite the 36% y/y slump experienced in a single year in 2015 creating a low base level. We expect premium and ultra premium sales to grow at an even slower rate, with a 33% increase to 186,000 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.