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16 I Companies & Markets bne November 2017
Renault expects its money's worth in Russia as market recovers
bne IntelliNews
Renault is finally seeing a pay-out from years of supporting Russia's largest carmaker Avtovaz, as the French carmaker expects its sales to double this year in a market that turned the corner in 2017.
According to Renault's estimates, Russia's car market has started to grow again this year for the first time in three years and will expand by 80% comparing 2016 sales with those expected in 2022.
Strong outlook on Russian market...
Currently, AvtoVaz iconic Lada model is the biggest selling car brand in Russia, and Renault expects sales to grow to at least 500,000 units a year, which would correspond to a 20% share. Sales of cars made under Renault's own brand are expected to increase to 250,000 units a year,
or to a 10% share.
Lately, Renault's sales in Russia have been growing faster than the market. In January-August, sales of cars and light commercial vehicles in Russia were up 9.6%, while those of Renault increased 18%, and Lada saw a 15.5% increase.
“Russia's car market has started to grow again this year for the first time in three years”
AvtoVaz is still expected to receive about €1bn recapitalisation from Renault. Renault in June 2016 already gave AvtoVaz
a lifeline in the form of a RUB20bn bridge credit until the Russian company could obtain shareholders’ support.
The French company suffered a €620mn loss on Avtovaz
in 2015, soaring from a €182mn loss in 2014, which was attributed to “exceptionally difficult unanticipated operating
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conditions in Russia (market decline of 35%, average ruble rate decline of 33%, and the growing interest rate)”.
Nevertheless, Renault CEO Carlos Ghosn told Bloomberg Television last year that the French carmaker will “do whatever it takes to sustain AvtoVaz and to allow AvtoVaz to compete when the recovery comes”.
...as recovery continues
The stable recovery of the Russian auto market continued with car and light commercial vehicle sales increasing by 18% year- on-year in September 2017 to 0.15mn units sold, according
to the October 9 report from the Association of European Businesses (AEB) that monitors the industry.
“The French company suffered a €620mn loss on Avtovaz in 2015”
AvtoVaz with its Lada brand remained the market leader in the reporting month, with sales up a very strong 24% y/y in September and 17% in January-September overall.
“September proved to be another good month on the way
to a continuous recovery of the Russian car market," head of the AEB Joerg Schreiber commented, noting that in absolute terms the sales in the past quarter caught up with the same quarter two years ago.
The market sentiment in the sector is strong, AEB argues, and revised its car sales forecast for the full year to 1.58mn units to be sold (1.48mn previously), up 10.8% as compared to 2016.
International business consultants PricewaterhouseCoopers see car and LCV sales in Russia in 2017 rising by 7-11% to 1.4mn-1.46mn units, on August 22 revising the outlook