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International Carmakers Confident of Market Revival

Published: August 29, 2014 (Issue # 1826)

  • The Ford Focus sedan was the bestseller in its segment in Russia between January and August 2013, but has not sold even half that number during the same period this year.
    Photo: Vladimir Filonov / SPT

International carmakers are hopeful that Russia can become Europe's biggest market and vindicate their decision to spend more on localizing production in the country, company executives said on the sidelines of the Moscow International Automobile Salon on Thursday.

If that is to happen, Russia's car market will need to stage a dramatic recovery. Sales in Russia have dropped by almost 10 percent in the first seven months of 2014 compared with the same period last year, according to the Association of European Businesses, a decline widely attributed to Russia's economic slowdown combined with geopolitical tensions over Ukraine.

The forecasts for the next four months are not positive. "By the end of the year we expect Russia's car market to decline by about 12 percent. But considering the negative impact the geopolitical tension has on trade, the decline could be even heavier," said Kay Lindemann, managing director of the German Association of the Automotive Industry.

But any car manufacturers looking for reasons to be optimistic need only look back a couple of years. The Russian automobile market quickly regenerated after the financial crisis of 2008-09, and by the end of 2012 annual car sales were close to 3 million units, double 2009 levels.

Prior to the current crisis, German carmakers were enjoying overall market growth in Russia, with the share of locally produced and imported German brands rising to 20 percent in 2012.

At the same time, German car producers were ramping up local production not only of car chassis, but of components as well, Lindemann said, adding that exports by Russian auto-part producers to Germany have gone from 27 percent last year to 41 percent this year.

The 3 Big Issues

Ford Sollers, a joint venture that handles production of the U.S. company's vehicles in Russia, has been one of the hardest-hit this year, with sales falling 52 percent in July.

The company has had to cut costs and production, and keep its prices at relatively low levels.

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Sunday, Oct. 26

Zenit St. Petersburg returns home for the first time in nearly a month as they host Mordovia Saransk in a Russian Premier League game. Currently at the top of the league thanks to their undefeated start to the season, the northern club hopes to extend the gap between them and second-place CSKA Moscow and win the title for the first time in three years. Tickets are available at the stadium box office or on the club’s website.

Monday, Oct. 27

Today marks the end of the art exhibit “Neophobia” at the Erarta Museum. Artists Alexey Semichov and Andrei Kuzmin took a neo-modernist approach to represent the array of fears that are ever-present throughout our lives. Tickets are 200 rubles ($4.90).

Tuesday, Oct. 28

The Domina Prestige St. Petersburg hotel plays host to SPIBA’s Marketing and Communications Committee’s round table discussion on “Government Relations Practices in Russia” this morning. The discussion starts at 9:30 a.m. and participation must be confirmed by Oct. 24.

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