Russian Passenger Car Sales Increase by 14% Y/Y in April

The Russian light-vehicle market posted a slightly more moderate—but still accelerated—growth rate in April, with a 14% y/y rise in sales during the month to 266,267 units, according to the latest data release from the Association of European Businesses (AEB) which collates light-vehicle sales data in the country. This is an increase of 33,189 units over the same period last year. The represented a slight slowdown on the accelerated growth rate that was recorded in the first quarter of the year, with the combined year-to-date (YTD) increase of 18% for the period which equated to 880,540 units, up from 745,474 units in 2011. There were no significant calendar effects during April. Commenting on April's sales data David Thomas, Chairman of the AEB Automobile Manufacturers Committee said, "The solid growth of the Russian automotive market continues into the second quarter. Although the pace of the year on year growth is stabilising to less than 15% in recent months, we still feel that the AEB full year forecast for passenger cars and light commercial vehicles should be increased by 50,000 units to 2.85 million."

Lada's position as the number one passenger car manufacturer continued to be eroded in April as the brand lost market share again. Despite the overall market rising by 14% in April, Lada's sales fell by 11% y/y during the month to 50,102 units. For the first four months of the year sales fell by 11% to 159,490 units. The company retained the top two spots in the best-selling models list with the Kalina and the Priora, although both models also lost out in the growing overall market, posting declines of 8% and 15% respectively with sales of 13,890 units and 11,374 units respectively. The Hyundai Solaris was again the third best-selling model overall in the April, with sales of 10,979 units. The Russian-built model has occupied the position of the best-selling model by a foreign OEM in the Russian market almost unbroken since it was launched at the end of 2010. However, Hyundai was only the fifth best-selling brand in Russia, behind AvtoVAZ, Renault, Kia and Chevrolet. The latter two brands already benefit from having a significant number of their models made in Russia by the AvtoTor contract manufacturer. The Ford Focus was the fifth-best selling car in Russia in April, slotting in behind the new Lada Granta. The Focus benefited from the ongoing improvement in the European economy as a higher-value model in comparison to the other models around it in the sales charts, with monthly sales volumes of 9,063 units, a rise of 33%. It also benefited from the new third-generation model now coming fully on stream. The Kia Rio was the sixth best-selling passenger car in Russia in April with sales of 8,100 units, which represented an accelerated rise of 60% y/y. This was largely due to the model now being manufactured at Hyundai's plant in St Petersburg. However, the fastest growing passenger car brand in Russia at this time is VW, which saw its sales rise by 82% y/y in April to 14,768 units, while its YTD sales rose by 103% y/y to 50,529 units. This result was driven by strong sales of the Polo and the Tiguan SUV, which are both now made in Russia.

Outlook and Implications

The Russian market continues to be on a largely positive growth track as a result of the country's ongoing positive economic development. However, we are likely to see slowing growth moving into the second half of the year as a result of higher base effects, while IHS Automotive is still somewhat pessimistic about the full-year growth total, only forecasting a nominal rise in the market of about 0.5% with the market rising to 2.7 million units for the full year. This will obviously require a significant slowdown in growth in the remainder of the year, with some months recording negative growth to achieve this total. Consumer confidence has now bounced off the bottom it had hit during the recession and household consumption has been adding momentum to the economic recovery. On the other hand, business confidence in the manufacturing sector, which had improved since mid-2010, suffered in the second half of 2011 and into early 2012 as the pace of new orders, particularly export orders, slowed, suggesting that activity in the manufacturing and service sectors would slow as well in succeeding quarters. A further weakening of the economic recovery could occur as a result of possible contagion effects from the situation in the Eurozone, with Greece looking increasingly likely to leave the European single currency altogether, and with further financial shocks impossible to rule out as things stand.