Car sales in Russia could dive nearly 30% in 2015

Neil Winton
Special to The Detroit News

Russia’s new vehicle sales are expected to fall nearly 30 percent in 2015 to 1.81 million, as the weak rouble continues to push up prices of imported cars and sanctions enfeeble the economy, IHS Automotive said.

In March, light vehicle sales plunged 42.5 percent to 139,850, bringing the first quarter performance 36.3 percent lower at 383,691, IHS Auto said, quoting statistics from the Moscow-based Association of European Businesses.

According to IHS Auto’s Russian market analyst Svyatoslav Kuchko, the numbers may be bad, but probably won’t get much worse.

“I think that this March, the market has already reached the bottom in terms of year-on-year decline. In the coming months the market will continue to fall but not at such an accelerated rate,” Kuchko said.

Kuchko said a government loan program to boost car sales is helping, inflation is slowing and the rouble exchange rate is improving.

Auto manufacturers in Russia face a dilemma. Cut their losses and quit, or hang on losing money waiting for the rally and cash in sometime in the future. Last month General Motors decided to cut its losses and pretty much withdraw all its assets from Russia. The rest, so far, have decided to tough it out, take current losses on the chin and hope to feel smug when Russia eventually becomes Europe’s biggest market.

GM said it would withdraw Opel by the end of this year, and most of the mainstream Chevrolet vehicles. It will stick with Cadillac and upmarket Chevys like the Corvette and Camaro. GM will halt production at its St Petersburg plant by the middle of the year.

Ford Europe, which has a local partner Sollers, is hanging on in there.

So is Renault, which through its affiliate Nissan of Japan and its control of local AvtoVAZ has more than 30 percent of the Russian market. Renault and Nissan indirectly own 50.01 percent of AvtoVAZ, which makes the Lada, among other vehicles.

Peugeot-Citroen and Mitsubishi have a joint venture plant in Russia, and said they will halt production for the second time this year and cut 100 jobs.

Volkswagen will reduce output at its Kaluga plant, and shed 150 workers.

Late last year PricewaterhouseCoopers said Russian car sales could shrink another 35 percent in 2015, after falling 10 percent to 2.49 million in 2014.

In March, Russia said it would spend the equivalent of $424 million to support the auto industry, after announcing $166 million of aid the previous week. The money will be used to subsidize interest on car loans and finance the purchase of trucks and commercial vehicles by state institutions.

Meanwhile, Mercedes still plans to build cars in Russia, and a Russia media report Thursday said it has narrowed down the location to three potential sites. It will decide next month, the report said, Automotive News reported.

The Russia economy will have to wait for a resurgence in the oil price, and an end to hostilities with Ukraine and the sanctions that go with this, before beginning to rally.