Page 87 - RusRPTDec18

9.1.2 Automotive sector news
Kozak proposes new regime for car manufacturers. Vice PM Dmitrii Kozak said in a meeting last week that he wants to ensure equal access to government subsidies for all auto companies. To this end, he has proposed switching from industrial assembly agreements to special investment contracts (SPIKs). This move is part of Russia’s push towards localization. Currently, the government uses industrial assembly agreements, which offer subsidies to auto manufacturers that agree to assemble cars in Russia. Kozak would like to see not just the assembly but also the manufacturing of car parts in Russia. Special investment contracts (SPIKs) would allow the government to reward auto producers that localize more production with greater subsidies. In response, Hyundai and BMW are talking about building new factories in Russia, but — as always — international companies will only be willing to follow through if the business climate is favorable.
Sales of cars and light commercial vehicles (LCVs) in Russia in October increased by 8% year-on-year to 0.16mn units, with January-October 2018 sales up by 14% y/y to 1.46mn, the latest data from the Association of European Businesses (AEB) shows.
The growth rate of the car market continued it slides into the single-digit zone, as 2018 marks the second year of market recovery exhausting the base effect. But the front-loaded purchases of cars are expected to continue until the end of the year, with consumers avoiding higher prices on weaker ruble and VAT hike.
"Based on the latest trends, we see some upside risk to our current forecast of the market growing 11% y/y in FY18 – all the more so as the planned increase of VAT from 2019 might pull forward some demand," VTB Capital commented on November 7.
Previously AEB even revised the sales forecast upward to 1.8mn units in 2018 or 13% y/y growth "in view of the current market conditions, and the expected VAT increase from January next [year]."
As for next year, "while for now the market is doing fine, there is a growing concern among its participants about the continuity of retail demand from January 2019,” the head of AEB Joerg Schreiber warned.
Still, VTB believes that the market will likely continue to grow next year, although a slower pace, while the start of the next year could see a notable decline in sales.
In October Russia's largest car producer AvtoVAZ remained the market leader, with a 20% share. The company's sales were up 12% y/y in October and 17% in ten months of 2018. LCV sales of sanctioned GAZ of Oleg Deripaska declined 11% y/y in October, but were still up 2% y/y in ten months. VTB also noted that Sollers managed to improve its UAZ sales by 1% y/y in October, but still declined 5% y/y in January-October.
87 RUSSIA Country Report December 2018 www.intellinews.com