Increasing demand for foreign branded cars in Russia is creating troubles for her own domestic car manufacturers as these makers are not able to keep up with demand.
The rapid stride in the economic growth of Russia has made its people capable to import cars from some of the most developed countries in the world. But this is not a good indication for domestic auto manufacturers, according to the report, “Booming Russian Automobile Sector”, by RNCOS. The report says that the Russian automobile producers are already facing the problems of inferior quality, poor distribution system and lack of investment.
As reported by Interfax, Economic Development and Trade Ministry of Russia has estimated that import of foreign brands of automobiles would escalate to two million by 2010, higher from a projected 1.4 Million in 2007.
Speaking at an Auto Industry Conference in Moscow, Andrei Klepach, Head, Macroeconomic Forecasting Department of the Ministry, said, “Automobile production (in Russia) is a weak spot”, as reported by Interfax.
According to Klepach 'Only a small niche of about 600,000-700,000 cars per year, which is less than now, will remain for domestic automobiles due to the expected growth in imports to two million cars and the assembly of foreign cars (within the country) at a level of 1.2-1.3 Million cars with the size of the market expected to stand at 3.5 Million automobiles.'
Economic experts have accredited several reasons, including rise in personal disposable income, accessibility of consumer credit and tax reforms, for rise in import of foreign branded cars in Russia. In addition, selling foreign cars in the country is much more profitable than selling domestically-manufactured cars. Hence, businesses sell foreign cars are flourishing exceptionally and the domestic automobile industry is facing shortage of investment.
Globalization has enhanced the awareness of people and its impact reflects in their demand for advanced technology in automobiles. Russian people are demanding for international quality and better performance in locally developed automobiles. Consequently, domestic automobile players are molding themselves in accordance with the situation to maintain their existence. However, dearth of adequate technological platforms and lack of investment is making the local manufacturers unable to meet the demand of desired cars.
The upward movement in demand for foreign branded cars has opened gates for foreign players who are very keen to collaborate with domestic players to exploit the Russian automobile market.
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