Analysis of the Russian Automobile Market: Results from 2018 and Forecasts for 2019
Russia ranked fifth in Europe in terms of car sales in 2018, with Germany, Great Britain, France, and Italy leading the way. In the global car market rating, Russia held onto its twelfth position.
2018 Dynamics of the Russian Car Market
According to the Association of European Businesses’ Automobile Manufacturers Committee, the market for new light and light commercial vehicles in 2018 reached 1,800,591 units, a 12.8% increase from 2017. Notably, this exceeded expectations, as the Committee had predicted a 10% growth to 1.75 million units in March of the same year.
Both the mass and premium segments saw growth in 2018, with a 13.9% increase and a 7.4% increase, respectively. Mass brand cars had the highest sales, reaching 1,572,246 units, representing 91.2% of the total turnover.
Russian Car Marker Structure
Over the past decade, the Russian car market has experienced a significant decrease in sales of light vehicles, with a 40% drop in 2018 compared to 2008. However, the market has undergone notable changes during this time.
Ten years ago, Japanese cars were the most commonly purchased by Russians, accounting for one in four cars sold. Nowadays, European cars have taken the lead with a 26.7% market share, up from 17.8% in 2008. Meanwhile, Japanese brands now make up only one-fifth of the market and have even fallen behind Korean brands. Interestingly, Korean brands have made the most impressive gains, increasing their market share from 14.1% to 24.3% over the past decade.
List of the 10 Most Popular Car Brands Sold in Russia
1. Lada — 360,204 sold cars (+16%),
2. Kia — 227,584 (+25%),
3. Hyundai — 178,269 (+13%),
4. Renault — 137,062 (0%),
5. Toyota — 108,492 (+15%),
6. Volkswagen — 106,056 (+19%),
7. Skoda — 81,459 (+31%),
8. Nissan — 80,025 (+6%),
9. GAZ (commercial vehicles) — 60,677 (+4%),
10. Ford – 53,234 (+6%).
In 2018, among the car brands that sold over 10,000 units, Mitsubishi showed the highest growth rate of 87% with 45,391 cars sold, followed by Skoda with a 31% increase at 81,459 units and Kia with a 25% increase at 227,584 units.
However, it was a challenging year for Datsun and Lifan, which experienced a decline in sales with a decrease of 16% (20,559 units) and 11% (15,097 units) respectively compared to 2017.
As of the end of 2018, the top three auto manufacturers in Russia were Renault-Nissan-Mitsubishi, KIA-Hyundai, and Volkswagen Group, which together held over 70% of the market.
The LADA Vesta became the best-selling model, showing the highest market growth among the Top 20 with a 40.2% increase and replacing the 2017 bestseller, KIA Rio, from the top spot in the sales ranking.
Ranking of the 10 Best Selling New Foreign Cars in Russia
By the end of 2018, the sales of foreign cars, including LCV, reached a total of 1.34 million units in Russia, an increase of 13.1% compared to the previous year. The majority of the top ten models also showed an increase in sales in Russia, with the KIA Sportage crossover having the largest growth of 32.7%. However, only two models experienced a drop in sales – the Hyundai Solaris and the Renault Duster (-4.4% and -5.5%, respectively).
What is the number of auto dealers operating in the Russian market?
Despite the steady growth of the Russian car market for the past 1.5 years, the number of dealer networks has decreased. In mid-October 2018, the total number of official dealerships for the sale and maintenance of light vehicles was 3,427, according to the AUTOSTAT analytic agency. This was 63 fewer than at the beginning of the year (3,490 in mid-January). The reduction in the number of dealerships in Russia was due to the termination of 359 effective dealer contracts, while only 296 new contracts were concluded.
As of mid-October, AvtoVAZ maintained the largest dealer network in the country, with 298 dealers for LADA cars sales and maintenance. Following at a distance are Korean manufacturers KIA and Hyundai, with 185 and 183 dealers respectively. The top 5 also includes French automaker Renault (148 dealers) and Japanese brand Nissan (133). Eight more brands that are officially presented in Russia have more than 100 dealership centers.
What Can We Expect in 2019?
According to Joerg Schreiber, Chairperson of the Automobile Manufacturers Committee of the Association of European Businesses, there are material risks and uncertainties in the Russian car market for the first quarter of 2019 due to the VAT growth and potentially tougher USA sanctions. However, he expects growth to start from the second quarter, with a tentative forecast of 1.87 million units or a 3.6% increase from last year.
Schreiber believes that currency rates, particularly for the dollar and euro, will be crucial this year. While car prices will continue to rise due to inflation and VAT increases, stable currency rates may lead to smoother price growth dynamics. However, predicting this trend is currently impossible.
Regarding sales segments, the crossover and off-road vehicle category is currently the fastest-growing segment, and Schreiber predicts that the SUV share will reach 50% within the next two or three years (up from 41.5% in 2018). This trend is driven by the popularity of SUVs, with many new models being introduced and several manufacturers concentrating their efforts on engineering SUVs to the detriment of sedans.
Conclusion
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