Russian Auto Sales Plunge 38%

Mar 12, 2015

February’s decline accelerates; worst hit are midprice brands such as Chevrolet, Nissan

New-car sales in Russia last month plunged 38% over a year earlier, and auto-industry executives warned a weaker economy and declines in the ruble’s value mean the worst is yet to come.

“The market is entering a very difficult phase now, and February is only the beginning. Industry sentiment is the next few months will be extremely difficult, and the market bottom has yet to be found,” said Joerg Schreiber, chairman of the Association of European Business Automobile Manufacturers Committee, which compiles monthly sales data.

The AEB said sales of new cars and light commercial vehicles in Russia fell 38% from a year ago to 128,298 units in February after a 24% drop in January. In 2014, sales were down 10%, but industry officials said a surge in demand in December from Russians seeking to use up their rapidly devaluing rubles buoyed volumes. AEB forecasts a 24% decline in sales in 2015, to 1.89 million units. “Market participants will need patience,” said Mr. Schreiber. In the first two months of the year, sales are down 32%.

In February, mass-market brands saw some of the steepest declines, with General Motors Co.’s Chevrolet brand sales down 74% to 3,255 units and Nissan Motor Co.’s sales off 45% to 9,447.

“There is no good news in the country: the economy is stagnating, living standards are dropping and people think that tomorrow will be worse than today,” said Vladimir Mozhenkov, President of Russia’s Association of Automobile Dealers. “The market is still looking for a bottom to stop the decline,” he said, noting that government stimulus programs could help reverse the trend in the coming months.

Tatyana Lukovetskaya, chief executive at Rolf Group, one of the country’s largest car dealers, said: “The main factors that impact consumer activity are the economic situation, the substantial increase in vehicle prices and higher cost of borrowing.” She noted that producers have raised prices in rubles between 10% and 40% this year.

While many major auto companies have built factories in Russia, they still rely on imports for many components, which have become dramatically more expensive with the ruble’s plunge. Many of the major producers have cut production and jobs at their plants.

One bright spot was the luxury-car market. Daimler AG’s Mercedes-Benz sales jumped 18% to 4,151 units, while BMW AG’s BMW brand sales rose 6% to 3,550. Porsche sales more than doubled to 381 vehicles.

Mr. Mozhenkov said luxury-car customers are more likely to be paid in dollars or euros, rather than rubles, and are less impacted by the economic slowdown so far.

Source: The Wall Street Journal