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Russian Car Sales to Slip upto 50% This Year
Feb 18, 2009

Automobile sales in Russia are projected to decline this year due to downward movement of country’s economy, low consumer confidence and liquidity crunch in financial market.

PricewaterhouseCoopers (PwC) said in a statement that the Russian automobile industry would see a drop of 20% to 50% in sales during 2009, spoiling two years’ rapid growth, as reported by Reuters.

The number of cars to be sold in 2009 is expected to decrease from 3.2 Million in 2008 to 2.3 Million. In 2008, 3.2 Million automobiles (valued around $69 Billion) were sold in Russia. If the automobile sales drop 50% in 2009, then total automobile volume will reach 1.6 Million Units and if it decline 25%, then sales will reach 2.3 Million Units.

The Association of European Businesses (AEB) also stated in its research that the demand for foreign cars in Russia declined 15% year-on-year and 10% in November 2008 and December 2008 respectively. This decline resulted in 25% full-year growth, while it was at 61% in 2007.

Thanks to weak country’s economy, rising unemployment and slow growth in personal disposable income, the Russian car sales will decline in the current year. Moreover, the tight budget has badly hit the consumers’ purchasing power; thus, they can’t make hefty purchases.

Besides, depreciation in Ruble (Russian currency) of nearly 15% in December 2008 also led to fall in cars sales which will continue to drop in coming months. Drying liquidity from the financial system forced the Russian banks to tighten car loan approval procedure which will make car purchase more difficult for consumers.

Declining sales of domestically-manufactured cars during 2008 built pressure on the government to raise import tariffs on foreign cars, effective from January 12, 2009. This decision will escalate prices of foreign cars by nearly 8%, which will not be good for the industry, according to the industry analysts.

According to a Research Analyst at RNCOS, “Heavy slump in automobile sales in 2008 led many global car manufacturers to reduce their production, or completely stop operations at local factories. All global auto giants, General Motors, Renault and Ford Motor Co., revealed that they didn’t get work at their Russian assembly lines late last year. Low projection for 2009 will add to the difficulties for industry players to regain profits.”

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