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Russia – the situation of the automotive market in the first half of 2010

New car sales increasing

The world wide financial crisis has led to a clear drop in new car sales in Russia, especially in 2009 (- 50 per cent compared to 2008). On the other hand, the sales numbers for light utility vehicles has increased by 14 per cent to 1.135 million cars from January to August 2010 compared to the same period in 2009. In August 2010 the increase was even 51 per cent (168,600 cars). According to the prognosis of the American European Business Association experts expect new car sales amounting to 1.67 million vehicles in the entire year of 2010.

For 2010 the following main tendencies can be stated for the Russian automotive market:

Customer tendencies:

• Increasing sensibility of Russian customers towards prices
• Customers postpone purchase of vehicle or buy cheaper cars (20 per cent)
• Middle class prefers Korean brands, mainly Kia, due to the attractive price performance ratio

Auto brand tendencies:

• Increase of sales especially for the Russian automobile manufacturer AvtoVaz in the first half of 2010 due to the car-scrap bonus initiated by the state
• Increasing share of locally produced vehicles in the lower price segment and contrary to this
• Increasing sales numbers for premium brands
• Decreasing sales numbers for imported brands in the upper price segment (500,000 – 700,000 rubles), especially A models
• Clear decreasing in sales of former Japanese bestsellers (Toyota, Mazda, Honda) due to high prices
• VW plans “model diet” in the Volkswagen plant Kaluga, if the permission for “screwdriver production“ will not be prolonged
• In 2011 Sollers will double the production of SsangYong cars
• Starting in October, Renault will produce the models Megane and Fluence in Russia
• Nissan considers extension of product range in their Russian plant

Russia – economic situation in the 3rd quarter of 2010

The Russian summer 2010 and the incapability of Russian authorities

The fires in the Russian forests are finally under control - after tremendous efforts of many helpers and theatrical appearances of the Russian Prime Minister Vladimir Putin. But the consequences of the fires will be a hard nut to crack for the entire country, especially after having just overcome the worldwide financial crisis. The flames feed on the gross national product and increase inflation. Investors are insecure, and insurances are facing claims in millions. The recovery program is likely to consume billions of rubles. In the next three years Russia will not see a fast growth like China or a breakthrough in terms of investments and industrial production.

President Medvedev imputes the forestry authorities to the government

In order to be able to react more flexible and more efficient in the future when such disasters occur, President Dmitri Medvedev has signed a decree that the Russian federal forestry authority will function as an independent unit directly under the government. Before, it used to be a structural unit of the ministry of agriculture.

Russian ministry of economics expects aggravation of competitive climate

The ministry of economic development states a decline in the competitiveness of the Russian economy in a study issued on September 3, 2010. The study also indicates that the share of the small oil producers has decreased considerably in recent years due to a high concentration of capital in the main market for fossile fuels. The construction segment is mentioned as another problematic market by the ministry. In this area corruption has reached such a high level that competition takes place in offices and not on construction sites.

End of crisis with risks: Russia facing new challenges

After the world economy has survived the first phase of the crisis, Russia is facing new challenges, writes the Russian offshoot of the magazine „Forbes“ in its latest issue. In April the minister of finance, Alexej Kudrin, already warned that the Russians have to expect a stagnation of budget revenues for the next ten years. Therefore, the public expenditure has to be drastically reduced. Kudrins concern is understandable: Russia is risking to convert from a country reducing its debt into a country increasing its debt. It´s high time to create new scenarios and find new strategies.

LUKoil introducing ethics code

It is especially interesting that the second largest Russian oil company OAO LUKoil has introduced a code for business and corporate ethics. According to a press release of August 19, 2010 any sort of internal discrimination of employees because of gender, race or ethnic heritage, religion or political attitude is to be excluded. Furthermore, the employees are not allowed to accept presents, services and any other advantage that might limit their objectivity and independence while doing their job or influence decisions not in favour of the company they are working for. The code also regulates the handling of insider information, authorities and business partners. “ The code for business and corporate ethics is one of the instruments for structuring a company in which all employees are members of a professional team”, says Vagit Alekperov, president of LUKoil, in a quotation.

Car manufacturing in Russia increasing by more than 50%

The state authority Rosstat informed on May 19, 2010 that from January to April 2010 Russia has produced 54.7 per cent more vehicles (283,000 cars) than in the same period last year. The production of freight vehicles increased in the same period of 2010 by 37.4 per cent to 34,700 vehicles. Also 21.2 per cent (8,800) more busses were manufactured. The Russian car industry is booming at the moment.

Daimler AG is planning to distribute their vehicles through the sales network of the Russian freight vehicle manufacturer OAO KamAZ, of which they hold a share of 11 per cent, starting in the fall of 2010. 90 institutions in Russia and other countries also belong to KamAZ.

AutoVAZ, the largest Russian car manufacturer, benefits from the Russian scrapping incentive and increases prices by 2 per cent on average. Car dealers increase prices for AutoVAZ cars even by 7 - 18 per cent. Their dominating market position and the good sales numbers in April 2010 cause optimism in the company. In comparison to April 2009 the growth rates ranged between zwischen 22.2 per cent (Lada 4x4) and 62.6 per cent (Lada Priora).

OAO GAZ, which belongs to the automotive and engineering group GAZ, stated a turnover increase in the first quarter of 2010 by 47.9 per cent. The core business of OAO GAZ is the production of vendor parts for cars and light utility vehicles of GAZ.

OAO Sollers Nabereschnyje Tschelny, the manufacturer of Fiat and SsangYong vehicles, belongs to the automotive group Sollers and stated that their turnover has tripled to 550.7 million Rubles. The main reason for this improvement is the closing of state commissions for the delivery of the model to the Ministry for Disaster Control and the Ministry of the Interior.

The Russian affiliated company of Hyundai, OOO Hyundai Motor Manufacturing Rus, has taken a moulding press on trial run in their car manufacturing plant in St. Petersburg on May 19, 2010. With this, the Korean company is the first foreign car manufacturer in Russia operating its own moulding press. The moulding press is able to produce 17 different elements of an auto body. It is planned to start the trial production in August 2010 and to officially open the plant in September 2010. The beginning of the commercial production is scheduled for January 2011.

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