BMI View: BMI is increasingly bearish on the near-term outlook for domestic vehicle sales and production in Russia as we enter 2014. A combination of sluggish demand for new cars, and a deteriorating economic backdrop, means that we are now targeting declines in both sales and production over 2014.
Looking at the most recent data available as this report was being compiled, light vehicle sales in Russia declined by 7.7% year-on-year (y-o-y) in October 2013, to 234,481 units, taking sales for the first 10 months of the year, which declined by 6.9% y-o-y, to 2,281,181 units. Previously, we expected the growth rate to pick up slightly in Q413, due to lower base effects. However, we believe that the country's weak consumer story is increasingly impacting the segment, as the substantial decline in October suggests.
Accordingly, we now forecast a 6.5% decline in the passenger car segment, down from a 5% drop previously, and a 7% decline in light commercial vehicle (LCV) sales, from a 5% fall previously. The potential implementation of the car loan subsidy programme in 2014 may serve to boost sales somewhat, but we expect this to have a limited impact in volume terms.
BMI has long maintained that 2013 would see a slowdown from 2012 levels, when light vehicle sales in the country increased by 11%. Despite strong annual sales growth in the early part of 2012, autos sales moderated on the back of subdued private consumption in the second half of the year. We maintained that such growth in the segment was on the back of an unsustainable rise in consumer sentiment, fuelled by cheap credit, which was likely to unwind over the course of the year. This played out, and these dynamics continued to impact sales in 2013. Indeed, we believe this erosion of private consumption will continue as unemployment creeps upward, real wages dip, and access to credit slows. This has informed our bearish vehicle sales outlook for the year.
In July 2013, the Russian government announced that...