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9.1.2 Automotive sector news
Sales of cars and LCVs in Russia increased by 11% year-on-year in August and by 18% y/y for January-August 2018 to 0.147mn units, according to the latest data by the Association of European Businesses (AEB). The recovery of the car market continued throughout 2018, but in the summer analysts warned of price increases and front-loaded purchases amid ruble weakening threatening to slow growth in the future. Recent reports confirmed that several carmakers on the market plan to increase price. "In August the healthy trend continued, supported by a spike in spontaneous customer purchases on the background of the recent weakening of the ruble exchange rate. The growth story is likely to continue in the coming months, as the planned VAT increase from January 2019 should make sure retail demand remains strong - in any case before the end of the current year," the head of AEB Joerg Schreiber commented. Lada brand of Russia's largest carmaker Avtovaz remained the market's leaded, with a 20% share, in January-August 2018, followed by Kia (13%) and Hyundai (10%). Lada increased its sales 9% y/y in August and 18% y/y. Among other Russian producers, GAZ of sanctioned oligarch Oleg Deripaska posted flat sales of LCVs in August and 7% y/y increase in January-August overall.
Russian government will spend RUB10bn ($143mn) on supporting car demand in 2019 , Tass reported on September 15 citing the Minister of Industry and Trade Denis Manturov, without providing further details. Previously in July Russian government extended the program of car sector support until 2020 , providing RUB15bn ($240mn) worth of state financing for discounted leasing for an annual 0.045mn car sales. Discounted loans for consumers on the car market and "cash for clunkers" utilisation programme helped the domestic car market recover in 2017 and 2018 after four years of decline. The performance of the top seller on the Russian market Avtovaz carmaker and its Lada model has been supported by state initiatives . The government said it will prolong discounted loans "First Automobile" and "Family Automobile" introduced in 2015, and increases the first loan instalment discount for Far East consumers from 10% to 25%. Previously the government also discounted the shipping costs of new cars to Far East for car manufacturers. It is estimated that RUB15bn spent annually in state support would help sell 45,000 cars, which is less than 86,000 cars sold on discounted car leasing programme in January-April 2018, as calculated by the Ministry of Industry and Trade. Sales of cars and LCVs in Russia increased by 11% year-on-year in August and by 18% y/y for January-August 2018 to 0.147mn units, according to the latest data by the Association of European Businesses (AEB).
Russian carmakers are preparing to raise prices for new vehicles by an average of 1%-5% this autumn , Vedomosti daily reported on August 31. Analysts already warned that the planned VAT rate hike will push prices up, while recent ruble weakening increases price pressure for carmakers. Previously it was estimated that prices could rise by at least 2% this year, riskingslowingthe ongoingrecoveryofRussia'scarmarket. Industryexperts surveyed by Vedomosti believe that as Russian carmakers and foreign assemblers have localised at least 40-50% of their production, they can better absorb some of the ruble’s recent volatility and increase prices gradually to test the consumer reaction. Ford, Mazda, Skoda, premium models of General Motors (Cadillac and Chevrolet), Jaguar Land Rover are among the brands
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