MOSCOW, Dec 7: Auto sales in Russia have bounced back from the pandemic slowdown much faster than in other European countries as the weakening rouble fuels a rush in demand, but that may presage a sharp fall next quarter, analysts and industry sources said, reports Reuters.
Car sales in Russia, a major market where most top brands have production lines, fell 50-70 per cent during the April-May lockdown before a stop-start recovery and then growth of 3.4 per cent in September, 7 per cent in October and 5.9 per cent in November.
In contrast, sales in western Europe were flat in September and fell 6.1 per cent in October, according to LMC Automotive. Global sales grew 2.3 per cent in October.
Analysts say the brisk Russian purchases are spurred by pent-up demand from the lockdown and the expectation of further price rises due to the weakening rouble that has fallen 22 per cent against the US dollar this year.
Cars, including those that are locally-assembled, are sensitive to exchange rate swings as auto parts are often imported. Current prices are still not fully factoring in the currency devaluation.
“We expect the next round of price increases in January,” said Vladimir Miroshnikov, development director for Rolf, Russia’s biggest car dealer.
Cheaper loans, after Russia’s key interest rate was cut to a historic low of 4.25 per cent in July, also gave the market a boost, he said, but warned that the delayed demand is likely to be nearly depleted.
“The compensatory, follow-on demand can’t go on forever, usually it carries on for one or two months,” said Sofya Donets, chief economist for Renaissance Capital.
Household spending power is expected to remain depressed despite authorities saying they have no plans to impose a second lockdown to curb a surge in coronavirus cases since September.
Real incomes fell 4.3 per cent from January to September, with the second quarter’s 8.4 per cent fall the sharpest since the Russian financial crisis and debt default at the end of the 1990s, according to the Rosstat statistics service.
“The picture doesn’t look very optimistic from the point of view of consumer demand,” said Vladimir Bespalov, a VTB Capital analyst.
“People who had the money brought forward purchases, but there is still fairly major uncertainty in the economy and you’re not going to run out to the car dealership if things aren’t clear on the job and income front.”
Russia’s car market was tipped to become one of Europe’s biggest in the 2000s, but it was battered in 2014 by the crisis over Ukraine, sanctions and an oil price crash.
Annual car sales have not passed the 2 million mark since; Europe’s biggest market Germany sold 3.6 million cars in 2019.
Bespalov said first-quarter sales would likely fall several percentage points as some of next year’s demand has jumped forward to this year.
That, he said, raises the prospect of a market contraction early next year, though it is likely to cushion the drop this year.
On Friday, the Association of European Businesses said Russian sales this year would drop 13.5 per cent to 1.522 million cars.