Light-vehicle sales in Russia stay on positive track with 13.9% y/y rise in March
The Russian light-vehicle market rose more slowly in March, although YTD growth still stood at about 20% for the first quarter.
IHS Markit perspective
- Implications: The market is likely to find it difficult to continue to generate the double-digit increases it has managed in the last year as it moves into the second quarter of the year as a result of the higher base levels as the market recovered throughout 2017.
- Outlook: The Russian light-vehicle market posted another good result in March, with a 13.9% y/y increase in sales to 157,279 units, according to the latest data from the AEB Automobile Manufacturers Committee.
The Russian light-vehicle market witnessed a 13.9% year-on-year (y/y) increase in sales during March to a figure of 157,2798 units. This was the latest double-digit increase in the market as it maintained on its gradual recovery course which started in the first quarter of last year. However, March's sales results also represented something of a slowdown on the first two months of the year, which left the first three months of the year with a 21.7% y/y increase to 392,920 units. The chairman of the Association of European Businesses (AEB) Joerg Schreiber said, "Market momentum in March continued at a robust pace, concluding a 12-month long period recovery. From now on, it will be harder, at the same time significantly more valuable for the rates on a continuous basis. Market participants consent in that the prospect of further growth is the most likely scenario of market sales to improve by about 10% compared to 2017, to a level of 1.75 million units".
There was a very large variation in OEM brand sales performance in the Russian market in March. Market leader AvtoVAZ's Lada brand posted a robust 22% y/y increase in sales to 30,708 units. This left the brand with a 29% y/y increase in sales during the first quarter to 79,114 units. Kia had the best-selling model during March with the new Rio, which is gradually picking up sales momentum from its launch in September last year with 9,809 units, which was almost 1,500 up on what the old model managed last year. The Rio was the best-selling car in the first quarter to 25,370 units, which was almost a thousand up on the second-placed Lada Vesta. Lada had the second and third best-selling models in March with the Vesta, which increased by around one-third from a year ago to 9,181 units, while the brand's entry-point car, the Granta, was third during the month with sales of 8,381 units, which was 564 units up on what it achieved last year. On a brand basis Kia was second with sales of 19,096 units; it vastly outperformed the rise in the overall market, with a 31% y/y increase in volumes to 19,096 units. The brand generated a 40% y/y increase in sales during the first quarter, which equated to a figure of 52,210 units. The Hyundai brand was the third best-selling overall with two models in the top five; unlike the rest of the year the Solaris headed the Creta sub-compact sport utility vehicle (SUV). However, Hyundai's growth in March was less spectacular than its sister brand with a 17% y/y increase in sales during the month to 16,705 units, while there was a 28% y/y increase in sales during the first quarter of the year to 38,891 units, which was significantly ahead of the overall growth rate of 21.7% y/y during the month. Renault was fourth in a brand sales league table that now remains pretty static. The brand beat the market in March with sales of 14,047 units which represented an increase of 25%, with Duster sales climbing by 588 units during the month to 4,101 units as it fell to seventh in the model sales chart behind the VW Polo. In the year to date (YTD), Renault sales rose by 27% y/y to 33,195 units. But behind the top-four there were some big drops too. Toyota's sales fell by 8% y/y in March to 8,914 units and it rose only 4% in the first quarter to 20,587 units, which meant it fell behind VW in the YTD table. Toyota's poor performance for March and the first quarter was not helped by slowing RAV4 sales, with the new model making its world debut at the recent New York Motor Show. VW and Skoda recorded strong rises of 24% and 34% to take sixth and seventh in the brand table during the month. However, Nissan in eighth spot also posted a significant drop off in sales volumes, with a 21% y/y drop in sales to 6,402 units. This was not helped by a drop-off in sales of the X-Trail of almost 1,000 units in comparison to last year, while the Qashqai completely dropped off the list of Russia's top-25 best-selling vehicles in March.
Outlook and implications
The Russian light-vehicle market posted a reasonably robust performance in March, but there is little doubt there will be something of a slowdown as the year wears on against the higher base comparisons from when the market began to recover at the end of the second quarter of 2017. The market has been in recovery mode since March 2017 when Russian sales saw the first positive growth after three years of crisis. The very good y/y result in January and February 2018 (+31% and +25%), has been partly supported by the relatively low comparison base effect. The reduction of the growth rate in March 2018 has been expected by IHS Markit in the previous months. All in all, the market is definitely in the recovery mode. Considering only moderate improvement on the macro site, the current rebound is a clear sign of the market adjustments to the new conditions. There were some positive (even if very weak) impacts from the macro environment like stabilisation of the exchange rate, increase in industrial production and the real wages which supported the purchasing power of the Russian consumers.
In terms of wider macro indicators, Russian real GDP increased only 1.5% y/y in 2017, undermined by the contracting performance of industrial output. Increased government spending should lift growth to 2.0% in 2018, but the expiry of the one-off measures will slow full-year gains to 1.8% and 1.9% in 2019 and 2020, respectively. The 2018 real GDP growth rate is expected to benefit from increased social spending and firming private consumption, coupled with the one-off positive impact from investment and services exports related to the hosting of the football World Cup. Annual inflation will accelerate only moderately, helped by firmer consumer spending and commodities' price gains. Still, inflation will remain within the 4% target range set by the Central Bank of Russia, allowing room for further monetary easing throughout 2018. For the full year 2018, IHS Markit forecasts that Russian light-vehicle sales will rise from 1.59 million units in 2017 to 1.85 million units, making IHS Markit's current view of the recovery as considerably more optimistic than that of the AEB's .
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