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Russian light-vehicle sales rise 18 percent in May

07 June 2018 Tim Urquhart, B.A.

Russian light-vehicle sales post another robust rise in May with 18% uplift

IHS Markit perspective

  • Implications: Sales of new light vehicles in Russia continued to pick up well in Russia during April with an 18% y/y uplift to 147,525 units.
  • Outlook: The cumulative tally for the YTD rose 20%, and shows that the market is now enjoying a sustained uplift albeit still being helped by a relatively low base comparison

The Russian light-vehicle market posted another strong sales month in May with an 18% year-on-year (y/y) rise in sales to 147,525 units, according to the latest data from the Association of European Businesses (AEB). This was a slight decrease on the combined uplift for the first five months of the year of 20% to a figure of 682,970 units, however this is to be expected given the rising base comparison as the market began its recovery from the second quarter of 2017. Commenting on the market dynamics the head of the AEB's vehicle manufacturers' committee. He said, "Russian car market sales continue to recover at a robust pace in May, improving 18% vs. the same month last year. Cumulative volume gain in the first five months of the current year stands at 20% - a significant step ahead from the growth rate of 5% seen in 2017. This encouraging trend reflects the positive dynamics in the retail sector of the economy in general, accompanied by a steady improvement in consumer confidence. Vehicles sales in particular have been profiting in recent weeks from a weaker currency, prompting some customers to buy earlier rather than later. It remains to be seen whether, and to which extent, this factor will have an adverse effect on the future pace of retail sales."

On a brand-by-brand basis, market leader Lada underperformed the market marginally with a 14% y/y improvement during the month to 28,654 units. This was despite yet another set of strong results from the company's two best-selling models, the Granta which posted an increase of 1,162 units in comparison to the year before to 8,486 units, while the Vesta managed an almost identical increase to 7,673 units. In the YTD the Lada brand had an above-market increase of 23% to 138,480 units. However, as is usually the case at the current stage of the Russian LV market, the Granta and the Vesta were only the second- and third best-selling cars overall, with the Kia Rio selling 8,857 units to take first place. Kia was the second best-selling brand, as is usually the case as well, with a market-beating rise of 29% y/y to 19,561 units. In the YTD, Kia sales rose 33% y/y, which was the highest of any top-ten manufacturer over the course of the first five months of the year, with the Sportage also contributing heavily to overall growth levels in April. The third best-selling brand overall, Hyundai, also nailed the highest overall growth figure recorded on an overall basis, with a 33% y/y uplift to 15,829 units, with the YTD up 26% y/y to 70,613 units. The Solaris and the Creta were the fourth and fifth best-selling models overall in the month and in the YTD, and both did well in both periods, which fuelled Hyundai's brand growth. In contrast, Renault was the worst performing top-five OEMs during April purely in terms of volume growth with a 11% y/y uplift to 12,128 units, with sales of the Duster stagnant, while the Kaptur fell out of the top-ten list of best-selling models. The picture was better for the first five months of the year, with an 18% y/y to 57,277 units. VW was bolstered in fifth place by strong sales of the Polo, with overall brand sales up by 27% to 9,025 units, with YTD sales staying marginally about the market average, with a 22% y/y increase. The worst performing top-10 OEM brand was Ford which fell 6.0% y/y during the month to 3,701 units, in stark contrast to the YTD increase of 23% y/y to 21,360 units.

Outlook and implications

The recovery in the Russian light-vehicle market continues at a reasonable pace with a strong accelerated increase of 20% y/y in the first five months of the year. However, it should also be noted that the rise is also incumbent on the historically poor sales base level which remains low despite last year's mild full year recovery of 5%. The conditions on the ground remain far from optimal in terms of encouraging consumers to spend on big ticket items, which is why the government out in place such schemes as "First Car" and "Family Car" incentive programmes for first time buyers and family buyers. In terms of the macro picture, real GDP growth will benefit from increased pensions, wages, and social payments and from the exports of services and infrastructure investment related to the 2018 World Cup. Economic activity is likely to average 1.7% both in 2018 and 2019. The relatively weak performance reflects only moderate recovery in market oil prices, the negative impact of the April round of the US sanctions, lack of economic growth-stimulating measures, including meaningful reforms, and still-uncertain external and domestic demand conditions. Private consumption is rebounding owing in part to the pent-up demand since 2014. Although the modest growth rate reflects the negative impact on household budgets of a protracted decline in real disposable incomes and a modestly paced economic recovery. Consumers remain cautious, despite recent y/y gains in real wages and moderate unemployment of the economically active population. The rate of joblessness slightly edged down to 4.9% in April, from 5.0% in February-March, and 5.2% in January. The unemployment rate averaged 5.2% in 2017, returning to the 2014 level and climbing down from 5.6% in 2015 and 5.5% in 2016. While the joblessness rate is relatively modest, there is substantial anecdotal evidence of underemployment. The real money disposable incomes finally posted growth, up 5.7% y/y in April, 4.2% y/y in March and 4.4% y/y in February, after stagnating in January 2018 and declining throughout most of 2017. For the full year IHS Automotive's forecast will see a 15.9% y/y to 1.85 million units.

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The above article is an excerpt from AutoIntelligence Daily by IHS Markit. AutoIntelligence Daily provides same-day analysis of automotive news, events and trends. Get a free trial.

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