Russian Light-Vehicle Sales Maintain Double-Digit Growth in June, H1 Sales Rise 14%

Light-vehicle sales in Russia continued on a very positive growth track in June with sales rising by 10% and 25,277 units year-on-year (y/y) to 272,125 units, according to the latest set of data released by the Association of European Businesses (AEB). This represented a slightly slower growth rate than had been experienced in the previous five months of the year, with the combined first-half year-to-date (YTD) sales rising 14% to 1.41 million units. Commenting on June's and the first-half's sales results in Russia, chairman of the AEB's Automobile Manufacturers Committee Joerg Schreiber said, "With over 272,000 units sold in June, the Russian market for passenger and light commercial vehicles reached the best result in a single month since July 2008. Cumulative sales in the first six months of 1.41 million year 2012 also reached a new 4 years high. At the same time, we continue to observe a slow-down in the pace of growth, year-on-year as well as compared to preceding months. We anticipate to see some more consolidation in the 2nd half of the year, as the market stays comfortably on track to achieve full year sales in excess of 2.8 million."

In terms of the OEM outlook, AvtoVAZ's Lada brand continues to lose market share and ground to its rivals despite maintaining its position as the country's number one passenger car brand. In a market place that posted double-digit increases Lada has posted double-digit declines, which give a clear indication of the deterioration of the firm's sales performance. Sales in June fell by 18% y/y to 45,032 units, while the first-half sales trend was mildly better, although still posted a 14% y/y fall to 291,540 units. The Lada Priora was the market's best-selling car in June with sale of 13,704 units, although this was a 23% y/y decline. Chevrolet was the second-best-selling brand and recorded a sales trend largely in line with the rest of the market, with sales rising by 15% in June to 20,746 units and 17% y/y in the first half of the year to 95,534 units. This was slightly surprising given the very strong gains recorded by the Chevrolet Cruze and the Niva SUV. Renault was the third best-selling brand in the first half, with a performance that significantly outperformed the wider Russian market. Renault's sales in June rose by 31% y/y to 19,859 units, bolstered by strong sales of the Sandero. The French OEM's YTD sales also recorded a very positive growth track, with sales up 29% y/y to 95,579 units. Kia and Hyundai were fourth and fifth in the YTD, with sales rising by 25% and 21% respectively. However, the brand that made the most progress in Russia during the first half of the year was VW, which posted a highly accelerated growth rate as it benefited from manufacturing more vehicles at its plant in Kaluga. The brand's sales rose by 41% in June to 15,747 units, with YTD sales up a highly impressive 78% y/y to 81,050 units. The main catalyst for this boost in volumes is the new locally manufactured Polo, which was specifically designed for the Russian market. Sales for this model in June rose 45% y/y to 6,830 units, while YTD sales rose 77% y/y to 35,547 units.

Outlook and Implications

The Russian passenger car market has continued its very strong recovery from the slump of 2009 in the first half of 2012, with the market almost on track to recover to its pre-crisis sales record of 2008. The market is on target to post combined light-vehicle sales of 2.8 million units this year according to the AEB, just short of the record 3.0 million sales total posted in 2008. However, IHS Automotive now believes this figure is mildly on the conservative side, and is expecting full-year sales of 2.9 million units. Although outright percentage growth figures in the second half of the year may moderate as a result of higher base comparisons, volumes should continue to grow positively. It was originally forecast that the recovery in the Russian light-vehicle market would take a lot longer, such was the extent of the slump which saw the market halve in the space of a year in 2009, with pre-crisis levels not due to return before 2015 at the earliest. However, the Russian economy has recovered well as a result of good export demand for its oil and gas reserves and this has had a positive effect on consumer confidence, while the country's financial institutions have become less reluctant to offer consumer loans to fund vehicle purchases. As a result the outlook for the Russian market moving into the second-half of the year continues to look positive, although macroeconomic turbulence from the Eurozone may still have an adverse effect on the market's short-term development.