The Russian light vehicle market has grown by 9.4% y/y during March, which has also helped move it into positive growth territory in the year to date.
IHS Markit Perspective:
- Significance: The Russian light-vehicle market has risen by 9.4% y/y in March, which has also helped it gain by 1.0% y/y during the first quarter.
- Implications: This is the first month of growth for the Russian market during 2017 as well as the first quarter of increase for four years, according to the AEB Automobile Manufacturers Committee. However, this is an improvement on an exceptionally low level.
- Outlook: This month could signal the beginning of the Russian light-vehicle market taking the long slog to higher levels. During 2017, IHS Markit sees that the market will increase 8.8% y/y to 1.55 million units.
Light-vehicle sales in Russia have ended the first quarter of 2017 on a positive note, according to the latest data published by the AEB Automobile Manufacturers Committee. Sales this month have grown by 9.4% year on year (y/y) to 137,894 units. This bucks the trend for the first two months of 2017, when sales fell 5.0% y/y in January and a further 4.1% y/y during February. This has helped lift the market's performance in the year to date (YTD) to 322,464 units, an increase of 1.0% y/y.
Leading brand Lada recorded another gain, this time growing by 12.8% y/y to 25,110 units. This improvement was underpinned by a strong performance for its Granta which sold 7,817 units – making it the second biggest selling model in the market – which is a gain of 50.9% y/y. Furthermore, the brand has been supported by the Vesta which grew by 31.4% y/y to 6,036 units, while the XRAY crossover jumped by 98.9% y/y to 3,020 units. However, the extent of these gains were offset by the further weakening of its older models like the 4x4, Kalina and Largus. Overall, Lada finds itself having reached 61,447 units in the first quarter, a gain of 8.0% y/y.
An even more positive performance was put in this month by second place Kia which has recorded a gain of 18.5% y/y during March to 14,614 units. The Rio was the best selling model again this month with 8,375 sales registered, an increase of 43.6% y/y, supported by the Sportage crossover which jumped from 733 to 2,106 units. Its South Korean stable mate Hyundai in third put in an even more significant leap, with its sales increasing 29.2% y/y to 14,219 units despite the Solaris declining 12.8% y/y to 6,699 units; this was offset by the entry of the Creta which sold 4,725 units.
Other brands to record strong gains this month have included Renault, which has grown by 19.3% y/y to 11,274 units as despite a decline by the Duster and Sandero, the new Kaptur has heavily bolstered its performance alongside some more modest improvement by the Logan. In addition, Toyota has risen 17.9% y/y to 9,709 units as its key RAV4 and Camry models helped with this positivity. Volkswagen (VW) has also increased by 15.7% y/y to 6,953 units as the latest generation Tiguan helped boost sales, despite a dip by the Polo.
The exception to the growth seen amongst the top-10 best selling brands has been Nissan which has recorded a decline of 6.3% y/y to 8,068 units. This was despite gains recorded by its leading Qashqai and X-Trail.
Outlook and implications
As noted above, this is the first month of growth recorded this year by the Russian light-vehicle market. The chairman of the AEB Automobile Manufacturers Committee, Joerg Schreiber, noted, "Finally, the sales trend on the Russian car market is moving in the right direction. Year-on-year, the 9% improvement in March was big enough to compensate the smaller losses in January-February, turning the cumulative sales result of the first quarter into a slight plus. This is great news for our market which had not seen a positive quarter in more than 4 years." However, he added, "But as the saying goes, one swallow does not make a summer. More solid month results will be needed before we can call this a robust trend".
Despite the gain this month, the Russian light-vehicle market still stands at an exceptionally low level. During 2016, the light-vehicle market recorded registrations of 1.427 million units, according to IHS Markit data, down from 2.945 million units recorded during the most recent peak in 2012. By comparison, the gain recorded this month is a mere edging up from where it stood in March 2016. The macroeconomic climate also reflects this situation, with IHS Markit seeing private consumption still reflecting the pressure on household budgets due to a protracted decline in real disposable incomes, and while further disinflation and modest growth in real wages will help households, consumer sentiment is expected to remain fragile in the near term. Furthermore, business investment levels have diminished in the wake of reduced capacity utilisation and limited availability in financing and high interest rates. This is only expected to rebound from the second half of 2017 when the correction of these factors comes into effect.
Nevertheless, this month could signal the beginning of the Russian light-vehicle market taking the long slog to higher levels. During 2017, we predict that the market will increase 8.8% y/y to 1.55 million units. However, we also anticipate that it will break through the 2-million-unit level before the end of the decade, reaching 2.18 million units by 2020.
About this article
The above article is from IHS Automotive Same-Day Analysis of automotive news, events and trends, and is a deliverable of the World Markets Automotive Service. The service averages thirty stories per day and also provides competitor and country intelligence. Get a free trial.