2014 has proved a positive year for new vehicle sales within Latvia. Over the first nine months of the year, passenger car (PC) sales were up by 19% year-on-year (y-o-y), at 9,239 units, according to figures from the European Auto Manufacturers Association (ACEA).
On the commercial vehicle side, 8M14 figures from ACEA show a total of 1,658 light commercial vehicles (LCVs) sold in country, with a further 754 medium and heavy commercial vehicles sold, plus a further 137 buses, for a total of 2,549 units sold year-to-date.
Adding the 2,549 CV units to the 8,445 PCs sold over 8M14 makes for a total new vehicle market of 10,994 units. On current sales trends, this leaves the Latvian new vehicle sales market on target to hit BMI's forecast of 16,384 units for the full year.
Looking forward, BMI's Country Risk team believes that the ongoing sanctions being levied against Russia by Western powers (as a result of Russia's activities in neighbouring Ukraine) could well impact on the Latvian economy as we enter 2015. Latvia is suffer ing in particular from the disruptions to trade imposed by first the West and now, in retaliation, by Russia. Russia remains a major export market for Latvia, especially in industries such as fish processing and dairy production. Even without these sanctions, we believe that decelerating Russian growth will translate into weaker external demand for Latvian exports. This could impact on CV sales within Latvia in particular.
The outlook for private consumption, a key indicator of the potential demand for new passenger vehicles within Latvia, is somewhat better. Moreover, against a backdrop of subdued inflation, the European Central Bank (ECB) looks set to keep interest rates at very low levels (the current lending rate was cut to just 0.05% in September 2014 and the deposit rate was cut to -0.2%), which should in turn lead to lower car financing rates and act as a support to Latvian new vehicle demand over the near term. This is why we...