Russian Domestic Auto Sales Up 15%

Signs of a mini boom in Russia are growing as domestic auto sales increased for the third straight month.
Sales for May were up 14.7 percent compared to May 2016, reaching 124,900 vehicles, according to the Association of European Businesses.

May is the third consecutive month with rapid growth in auto sales, with 129,400 cars sold in April (up 6.9 percent) and 137,800 cars in March (up 9.4 percent). According to AEB, almost all brands, with the exception of UAZ, Lexus, Audi, and Datsun, enjoyed strong growth. AEB representatives told Russian media that the figures indicate an acceleration of the automotive market’s recovery.

Russian automotive giant AvtoVAZ led growth, enjoying 22 percent growth last month, selling about 25,000 cars. South Korea’s KIA, the leader among foreign brands, grew sales by 26 percent, to 15,100 units. Hyundai, Toyota, Renault, and Volkswagen also enjoyed double digit growth (of 13 percent, 15 percent, 22 percent, and 28 percent, respectively).

Luxury marques such as Mercedes and BMW have also demonstrated growth, increasing sales volumes by 8 percent and 7 percent, respectively, mainly due to pent up demand following the effect of sanctions. Moscow has largely re-balanced the Russian economy away from the European Union over the past three years, with trade flows and relationships now being built with Asia.

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Sergei Tselikov, of the Autostat analytical agency, has said that growth has caught some dealerships off guard, with some showrooms running out of vehicles. “I think that the trend for market growth will continue, and turn into a stable long-term trend,” Tselikov said.

Observers estimate that annual growth will comprise 5-15 percent. Government support measures, comprising 7.5 billion rubles in budget subsidies, are expected to provide additional momentum. The measures include discounts for families purchasing their first vehicle, assistance for family cars, vehicles for farmers, etc. A healthy auto manufacturing industry is good for economic GDP growth as the automotive industry both employs and supports many other associated industries, such as the supply of auto components. Russia is also looking at export markets, including the Chinese market where AvtoVAZ expects to sell SUV’s.

The new figures lend credence to the fact that Russia will shortly regain its position in the top ten global auto manufacturing markets. Russia produced 1,303,989 vehicles in 2016, ranking 16th among car-producing nations in 2016, and accounting for 1.4 percent of the worldwide production. Eleven foreign auto manufacturers have production operations or are constructing their plants in Russia as the domestic market and access to EAEU markets is expected to improve.

“The Russian market is solidifying and growing,” says Chris Devonshire-Ellis of Dezan Shira & Associates. “Asian based auto component manufacturers may now wish to take a look at this market given the effectual withdrawal of European and American brands”.

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