Page 95 - RusRPTMay20

Global demand for oil should peak between 2025 and 2030s, ​according to the strategy​. ​But development of technologies for production of shale oil and other tight reserves expanded the economically efficient resource base and created excessive oil supply on the global market starting from 2014. Coordinated actions of OPEC, Russia, and other countries balanced demand and supply in 2017–2019, but the situation is still unstable and may need further coordinated actions. Oil supply may contract after 2020 as the most economically efficient reserves will have been depleted and investment in geological exploration and oil and gas projects contracted. These prerequisites create conditions for intensive investment in shelf and other expensive projects, which may prompt a new cycle of growth of prices for oil.
9.1.2 ​Automotive sector news
Sales of new passenger cars and light commercial vehicles (LCVs) in Russia could drop by up to 30% in 2020 ​due to the effects of the coronavirus (COVID-19) epidemic, RBC business portal reported on April 29 citing estimates of PriceWaterhouseCooper (PwC). As reported by ​bne intelliNews,​ Russia’s car and LCV sales i​ ncreased 4% year on year in March​, which helped 1Q20 sales to grow 2%, with 398,518 units sold during the period. This was attributed by analysts to front-loaded demand on ruble depreciation at the beginning of the year. But even before the epidemic the Russian car market was ​struggling to recover from the 2.3% decline seen in 2019​. Given the stabilisation of oil prices by the third quarter of 2020, and most of the lockdown measures being lifted in May-June, the car market decline is anticipated to be 30% by PwC. Not accounting for COVID-19, a 3.5% decline to 1.57mn vehicles was predicted this year, but is now seen as unlikely. RBC reminds that a recent forecast by the Boston Consulting Group (BCG) expects a 20-50% car market decline in Russia in 2020, depending on the scenario.
Russia's car and LCV sales increased 4% y/y in March, which helped 1Q20 sales to grow 2%, ​with 398,518 units sold during the period, according to the latest data from the Association of European Businesses (AEB).
However, the latest spike was largely driven by demand being pulled forward in anticipation of price increases on the back of the recent ruble depreciation, says VTBC. This hypothesis is partly supported by the fact the growth was skewed toward foreign brands, while all Russian brands ended March in negative territory. “We also believe that vehicle sales will fall sharply in April due to the lockdown measures taken to fight the spread of COVID-19,” VTB Capital (VTBC) said in a note.
Sollers saw another month of decline in UAZ sales, which dropped 11% y/y to 2,742 units in March. This resulted in 1Q20 UAZ retail sales falling 6% y/y to 7,293 units. Production at UAZ was suspended at the end of March due to the spread of COVID-19, but that the company plans to resume production from next week. Sollers will win some of government contracts following its recent decision to purchase at least 1,200 ambulance vehicles for the regions. Ford Transit sales (consolidated by Sollers) were down 1% y/y to 1,141 units in March and down 8% y/y in 1Q20 to 2,087 units. Overall, the valuation of Sollers as undemanding, but the company lacks near term triggers in the current volatile environment, according to VTBC. In the longer term the company plans to build an alliance with KAMAZ which could help.
95​ RUSSIA Country Report​ May 2020 ​ ​www.intellinews.com