International Carmakers Confident of Market Revival
Published: August 29, 2014 (Issue # 1826)
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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