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Customer LoginsSame-Day Analysis: Russian light-vehicle market finishes 2015 with 36% fall
The Russian light vehicle market experienced its biggest monthly fall in December 2015 at 45%, against the relatively high base of December 2014, as the market shows little signs of recovery.
IHS Automotive perspective
- Significance: Russian light-vehicle sales have finished 2015 on a full-year slump of 36% y/y to 1.610,126 units, after finishing the year with the worst monthly fall yet, down 45% y/y in December to 146,953 units.
- Implications: The Russian market rallied slightly in December 2014, so December's sales were the result of a higher base comparison as the scrappage scheme and keen discounts helped lift sales. However, it is still a disappointing end to the year and shows the fundamental weakness of the macro situation in Russia that is framing the vehicle market.
- Outlook: The extremely weak base comparison that the market will experience in comparison to 2015 will at least bring some moderation in the accelerated declines that were a feature of 2015.
The Russian light-vehicle market finished 2015 with a full-year decline of 35.7% year on year (y/y). Sales were down 890,187 units from 2014, for a total of 1,601,126 units, according to data collated and released by the Association of European Businesses (AEB). December sales fell 45.7% y/y to 146,963 units, which was a y/y decline of 123,682 units. Despite this being the biggest overall percentage fall posted from one month to the next in 2015, it was also the largest monthly sales volume total. Commenting on the results, the head of AEB's vehicle manufacturers' committee Joerg Schreiber said, "Expectations for the new year are muted. AEB member forecast for the total market in 2016 is to reach 1.53 million units, assuming no major change in government support to the automotive sector. Under this condition, it appears possible to limit further volume erosion to a level of under 5% year-on-year. This would be some progress in view of the dramatic losses in the recent past, bearing in mind however that it remains uncertain when the market will finally stabilize and return to much needed growth".
In terms of automotive brand performance, market leader Lada outperformed the overall decline in the market in 2015 by a reasonable amount with sales falling by 31% y/y to 269,096 units. The brand also significantly outperformed the market in December with sales declining by 34% y/y to 23,462 units. This performance was helped partially by the recent launch of the firm's new range-topping Vesta, although volumes are increasing and Lada is still selling the vehicle it will replace, the Priora. However, the brand suffered a particular reverse with the performance of the Kalina, which has been supplanted by the Granta as the firm's cheapest, entry-level model. Kalina sales fell to 1,785 units in December 2015, down from 6,206 units at the end of last year. The Granta returned to its position as the best-selling car in Russia in December, after sharing the position with the Kia Rio and Hyundai Solaris throughout the year
Second-placed Kia posted a good performance for the full year in the context of the wider market, with sales falling by 16% y/y to 163,500 units. However, the best performing major volume OEM in terms of limiting overall sales decline in the Russian market in 2015 was its stablemate Hyundai, which finished the year on 161,201 units, which was only a fall of 10% y/y. Kia was second overall in December with sales again significantly outperforming the overall market, with a decline of 25% y/y to 15,215 units; the best-selling Rio underpinned this performance. Hyundai also took third place in the best-sellers list in December, performing relatively strongly in comparison to its peers, with sales falling by 17% y/y to 12,570 units. This was fuelled by the very strong performance of the second-best-selling model overall in Russia in 2015, the Solaris. This dropped off by just 143 units in December to 9,359 units, while for the full year it actually bested last year's tally by 1,224 units to 115,868 units. The third-placed Kia Rio also sold more cars than in 2014. Both these individual performances were boosted by the scrappage scheme, and by both cars qualifying for the Russian government's subsidised loan scheme.
Renault was in fourth place and actually underperformed the drop in the overall market with a 38% y/y fall to 120,411 units, which will be extremely disappointing given the investment that the French OEM has made in the Russian passenger car market in the last few years, taking control of AvtoVAZ in 2014. Renault also experienced a 38% y/y fall to 11,934 units in December. Toyota was in fifth with its sales falling by a faster rate than the overall performance, with a 39% y/y decline to 98,149 units. December's sales fell 36% y/y to 11,177 units as best-sellers the Camry and the RAV4 took big hits. Out of the top-six brands sixth placed Nissan was the worst performing with sales down by 44% y/y to 91,100 units for the full year and a hugely accelerated 58% y/y to 8,410 units in December.
Outlook and implications
The Russian light-vehicle market experienced an accelerated reverse in 2015 despite numerous government stimulus plans such as the second round of the vehicle scrappage scheme, subsidised loans to purchase vehicles and direct financial aid to struggling OEMs and suppliers. The Russian economy is still struggling with very weak fundamentals which began gathering momentum in 2014 and have continued into 2015, and no matter what lever the government tried to use to stimulate the light-vehicle market it was a case of limiting the damage rather than generating any concerted positive growth. The Russian economy is contracting amid record low oil prices, high interest rates, strong consumer price inflation, sagging business sentiment, and virtual isolation from external financing in Western capital markets because of financial sanctions. The Russian economy was already in recession at end-2014. The 3.7% y/y downturn in the first three quarters of 2015 shows that the pace of contraction has accelerated. In addition energy prices resumed their descent in the third and fourth quarters of 2015 and are expected to remain well below earlier peak levels in the near-to-medium term, while the physical volume of energy exports will stagnate at best given the cutback in investment in that sector due to sliding energy prices. Added to this, the policy interest rate, boosted dramatically to dampen inflationary pressures and defend the currency in the final quarter of 2014, is only haltingly being lowered as concerns about inflationary risks have caused the central bank to pause its downward adjustment in recent months. Strong inflation, propelled by a weakening rouble, has cut into households' purchasing power. Investment has suffered and capital flight accelerated at the imposition of economic sanctions following Russia's annexation of Crimea, and Russian backing of separatist militias in eastern Ukraine only worsened the business and investment environment. Estimates are that net capital outflow in 2014 amounted to USD153.0 billion, compared with USD61.6 billion in full-year 2013, and continued in the first three quarters of 2015 at USD45 billion. The economics ministry projects capital flight in full-year 2015 at USD58 billion. We now have GDP contracting by 4.0% in 2015 and declining a further 0.5% in 2016. A modest recovery is seen taking hold in 2017, with growth at 1.2%. Against this harsh backdrop OEMs and suppliers and reconsidering investment strategies and in the case of General Motors, pulling out of the market altogether. The depth of the current recession could not be worse timed for the country's biggest carmaker Lada, which is currently engaging in a major new model launch programme in the form of the Vesta and the XRAY. For 2016 IHS Automotive is forecasting an absolutely static passenger car market at 1.61 million units as the market bumps along the bottom before starting a slow recovery in 2017 and towards the end of the decade.
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.