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Russian light-vehicle sales fall 11% in 2016, down 1% in December

13 January 2017 IHS Markit Automotive Expert

Although there may be signs of recovery in the Russian light-vehicle market, the improvement will be gradual and uncertain after another difficult year in 2016.

IHS Markit perspective

  • Significance: The Russian light-vehicle market posted an 11% fall for the full year in 2016 to 1,425,668 units, although declines have moderated in recent months, with December down only 1%.
  • Implications: The passenger vehicle market in Russia has been hit badly by the stagnant economy in recent years thanks to low oil and gas prices, sanctions and the subsequent weakening of the rouble.
  • Outlook: The Russian economy looks to be starting out on a slow and steady recovery but the anticipated small recovery in the 2017 light vehicle market will mostly be the result of the historic low base comparison, with a modest uplift of 8% expected for the full year.

The Russian light-vehicle market posted an improved result in the final quarter of 2016 which culminated in just a 1% year-on-year (y/y) fall in volumes during December to 145,668 units, according to data from the Association of European Businesses (AEB) Automobile Manufacturers Committee. For the full-year, sales declined by 11% y/y to 1,425,791 units which was somewhat disappointing given the already low base comparison from the previous year. Commenting on the results the chairman AEB Automobile Manufacturers Committee Joerg Schreiber said, "A nearly balanced year-on-year performance in December concludes a similarly balanced fourth quarter (-0.9% respectively vs. the same period last year). After the double-digit losses in the first nine months of the year, this is a good progress. The market as a whole is still lacking positive momentum, but apparently is in process of finally establishing its bottom."

Full-year sales of passenger cars and light and medium commercials in 2016 reached 1.42 million units, 11% below the 2015 result of 1.60 million. In 2017, the AEB believes the market has the potential to end a four-year period of decline and to return to moderate growth. Total market sales are expected at a level of 1.48 million units, or 4% above 2016's result.

On a brand by brand level, perennial Russian market leader AvtoVAZ has been consistently outperforming its peers in recent months as it has gained from the improving market sentiment and having compelling new product in the form of the Vesta and the X-RAY. In December the company's Lada brand posted a strong increase during December which will be a welcome positive sign for the brand, with sales rising by 18% y/y to 27,630 units. The brand also massively outperformed the wider market over the 12-month period, with sales down 1% to 266,296 units. The Granta retook the top spot in sales for December, but outright volume was nearly 3,000 units down on its December figure for last year. The real strength of the brand's performance derived from the excellent performance of the Vesta, which sold 7,014 units during December, which was nearly 6,000 units up on December's 2015 tally when production and sales of the new range-topping sedan were ramping up.

The best-selling model for the full year was the Hyundai Solaris, which was the first time that a foreign-brand vehicle was best-seller for a full year in Russia, after it missed out to the Granta by 5,000 units in 2015. Overall Hyundai's sales rose by 12% y/y to 14,070 units in December, with a 10% y/y fall in full-year volumes to 145,254 units. Renault put in a very strong performance in December to usurp the usual third place occupier Kia. The French OEM's sales rose 15% y/y to 13,765 units during the period, while it also posted a relatively strong full-year performance, with only a 3% y/y decline in sales to 117,230 units, although it still significantly lagged behind Kia's full year tally of 149,567 units. Renault's December sales performance was significantly bolstered by the refreshed Sandero, but the biggest contribution to Renault's growth was provided by the launch of the Russian-market Captur in recent months, which has immediately established a foothold in the market, with sales of 3,710 units during December. However, it is likely to be no coincidence that the Duster, which is in the same segment at the Captur, recorded a significant decline in sales, down to 3,896 down from 5,298 units in December last year. Other stand-out performers during December and for the full year were VW in sixth and GAZ LCV in seventh, with VW managing a worse than market average 4% decline in December to 7,589 units, but also a healthy outperformance for the full year, with sales down only 5% y/y to 74,221 units. GAZ enjoyed a rise of 47% y/y to 7,517 units as a result of strong sales of its LCV range, while it was also up 9% y/y for the 12 months at 55,803 units.

Outlook and implications

After the first three quarters of the year offered little respite from further accelerated declines following the calamitous 36% fall in the overall Russian vehicle market in 2015, the last quarter (as referenced above) has at least provided a moderation in the large monthly declines that had been a feature of the market for over two years by that point. In the last quarter the Russian light-vehicle market has fallen by an average of 0.9% y/y. There are signs of green shoots in the industry, such as the Ford Sollers plant announcing it was going back to a five-day week and some very strong individual model performances, such as the Lada Vesta and the new Renault Captur, which have been warmly received by the market despite the difficult overall fundamentals. However, the recovery will be very slow and it will be a long time before the market's past peak of nearly 3 million units will be matched. The performance of the light-vehicle market matched that of the wider economy in the first part of the year. The Russian economy continued to contract through the first three quarters of 2016, but the pace has slowed as oil prices and the rouble have regained some lost ground, and the economy has adapted somewhat to new conditions. It does not seem premature to say the Russian economy is about to turn, since the magnitude of y/y downturns in high-frequency data has diminished. GDP in the first quarter of 2016 (down 1.2% y/y), the second quarter (down 0.6%), and the third (down -0.4%), as well as higher-frequency data, showed the rate of contraction has been slowing. The Economics Ministry has estimated that the economy actually grew quarter on quarter in July-September, by 0.1%. There are several factors at work. Oil prices have regained some ground, and the government is pursuing its anti-crisis programme. Additionally, the economy has somewhat adapted to the new conditions. The weakened rouble has boosted the competitiveness of Russian manufacturing. In the case of the food industry, domestic producers are benefiting from the embargo on food imports from the European Union. We now have GDP contracting a further 0.6% in 2016. A modest resumption of growth is expected in 2017, but with only a 0.8% increase. The 2016 downturn has been modestly improved in our most recent forecasts, given the performance in the first three quarters and new high-frequency data. In terms of the light-vehicle market moving into 2017 and beyond, we forecast a reasonable uplift, albeit from a low base, of around 8% y/y to 1.55 million units, beginning a long and gradual recovery to 2.65 million units by 2024.

About this article

The above article is from IHS Automotive Same-Day Analysis of automotive news, events and trends, and is a deliverable of the World Markets Automotive Service. The service averages thirty stories per day and also provides competitor and country intelligence. Get a free trial.

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