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Russia Autos Report Q2 2008Published by: Business Monitor International Published: Apr. 18, 2008 - 79 Pages Table of Contents
AbstractRenault’s acquisition of a controlling stake in Russia’s largest carmaker, AvtoVAZ, will help revive thebrand, which has been struggling to compete with foreign brands on the domestic market, according to BMI’s latest Russia Automotives Report. The surge in Russian car sales in 2007 was spurred by a 61% rise in foreign brand cars to 1.65mn units, with General Motors (GM) brand Chevrolet overtaking Ford Motor to become the top-selling foreign brand in Russia during 2007. GM’s position on the Russian market is set to improve further as a result of the planned expansion of its manufacturing base in the country. Foreign brands’ success is the result of the Russian consumer trend towards quality and technology, over price. This is due to greater wealth, increasingly sophisticated tastes and widespread perceptions doubting the quality of Russian brands. AvtoVAZ, which makes Lada cars, saw sales rise by just 6.2% year-on-year (y-o-y). Although it sold a record 663,500 cars and remained the most popular brand overall, its market share is being eroded by foreign brands. Given current trends, the market share of Russian carmakers is expected to fall to around 25% by 2012, or just 1.36mn units. This would equate to a 50% rise in sales of Russian brands over 2007 levels, compared to a 125% increase by foreign brands. However, while Russia's recent growth in car sales makes the car market profitable for most foreign carmakers, over-capacity could post a significant threat to long-term profitability. Trade liberalisation would even the playing field between cars manufactured in Russia and imports, challenging the dominance of Russian-based assembly units. AvtoVAZ is targeting sales of 1.0- 1.2mn units by 2012, according to BMI research. It is in the context of AvtoVAZ’s declining market share and the failure of state arms dealer Rosoboronexport to turn the company around following its take over of the carmaker in late 2005, that Renault has thrown the company a lifeline. Renault is aiming to complete its take-over of a 25% stake in AvtoVAZ by mid-2008, with company sources valuing the bid at US$1.3bn. AvtoVAZ’s take-over by Renault will inevitably lead to a deal on assembling Logan and Mégane models. The French carmaker plans to invest US$900mn in modernising AvtoVAZ’s operations, with production increasing from 1mn to 1.5mn units with vehicles produced under Renault and Nissan brands. The first victim of the agreement is likely to be Canada’s Magna, which had planned to build an assembly plant with an initial capacity of 220,000 low cost cars per annum. Another victim of the deal would be GM’s tie-up with AvtoVAZ. Russia scored 68.8 (out of a theoretical maximum of 100) in the BMI automotive business environment rating, putting it 12.6 points ahead of the Czech Republic. This market's stronger areas include its market size and its strengths in production. Areas of particular weakness are the competitive and regulatory environments and the country’s overall economic structure. Russia has great potential for increased vehicle ownership, with a credit boom helping to raise car purchases over the forecast period. BMI research shows that those foreign manufacturers with a local production presence have reported better sales than those that do not. Our forecasts are in line with government expectations, with output at 2.93mn units in 2010 and 3.80mn units by 2012. By 2012, output should be more than double the level achieved in 2007, but this will still not be enough to satisfy domestic demand. Get Full Details About This Report >> |
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