BMI View: BMI has become increasingly bearish on the near-term outlook for domestic vehicle sales and production in Russia. A combination of sluggish demand for new cars and a deteriorating economic backdrop, coupled with increased tensions with the West following Russia's annexation of Crimea in March 2014, mean that we continue to target declines in both sales and production over 2014 .
Light vehicle sales in Russia declined 3.8% year-on-year (y-o-y) over the first four months of 2014, to 829,046 units, as ongoing weakness in the country's private consumption levels weighed on the segment. On the back of our expectation for a further deterioration in private consumption in the coming months, BMI is revising its forecasts to a 5% drop in the passenger car segment, from a 3% decline previously, and a 5.4% decline in light commercial vehicle (LCV) sales, from 2.4% previously. We expect total light vehicle sales to decline 5.1% in 2014.
BMI expects to see ongoing erosion in private consumption throughout 2014 as inflation remains elevated, the currency weakens, unemployment creeps upward, real wages dip, and access to credit slows. These dynamics have weighed on sales over the year to date, as consumers remain reticent over big-ticket purchases such as new cars.
Moreover, we expect to see a more pronounced deceleration in private sector spending in the second half of the year, as capital outflows and political uncertainty weigh on fixed investment while elevated inflation erodes consumer purchasing power. These dynamics have informed our bearish light vehicle sales forecast revision for the year.
On the production side, despite the May 2014 announcement by Chinese autos manufacturer Great Wall Motor that it is to invest CNY2.1bn (USD337mn) in a vehicle production site in Tula Oblast, BMI remains bearish, forecasting a 4% decline in Russian passenger car production in 2014.
The majority of Russian autos output is for the domestic market, on the back of...
The Russia Autos Report features the latest data and forecasts covering production, sales, imports and exports.
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