Menu

The Russian light-vehicle market suffered its worst monthly decline of the year in November, IHS Automotive, the global automotive intelligence unit of IHS, has reported. Light vehicle sales have consistently dropped in 2015 as a result of headwinds from falling oil prices, sanctions from the EU and the US that have caused the weakening of the Russian economy and a weak rouble.

Data by HIS Automotive show sales in November fell by 42.7% year-on-year to 131,572 units, bringing the year-to-date sales further down by 34.5% year-on-year to 1,454,253 units.

In terms of brand-by-brand sales, Russian market leader AvtoVAZ outperformed the market, partially helped by the launch of its brand new Vesta range-topping flagship in November. But despite the Vesta model adding 1,748 units of sales in November, AvtoVAZ posted a 29% year-on-year decline in November to 21,580 units.

The Hyundai and Kia brands occupied the second and third places, respectively, in the market. Hyundai had the second-highest sales count during the month with a 7% fall in sales during November to 15,101 units. Hyundai Solaris, was once again Russia's best-selling car in November with sales rising by over 1,000 units to 11,462 units as it continued to benefit from the various Russian government incentive packages like scrappage and subsidised car loans. Hyundai's year-to-date sales were down 10% year-on-year to 148,631 units.

Kia, which took third place in brand sales, saw its vehicle sales tumbling by 32% year-on-year during the month to 14,125 units. This was largely caused by an accelerated decline in the sales of its best-selling Rio, which was down by 31.2% to 8,253 units. For the year-to-date, Kia sales fell by 16% to 175,491 units. Renault and Toyota in fourth and fifth spots respectively posted highly accelerated declines during the month, with sales falling 46% and 53% respectively.

A number of factors conspired to create the perfect storm that resulted in the 42.7% decline. 12 months ago, there was a rush, especially among wealthier Russians, to convert their cash into physical assets as the rate of decline in the value of the rouble accelerated. This conspired with the launch of the second round of car scrappage in September to lift sales to a relatively high level in November 2014.

The bright moment for the mainstream Russian passenger car market was the launch of the brand new Lada Vesta. The new model will replace the Priora and will set new standards for the Lada brand in terms of design and quality. The unfortunate part is the launch of the car which coincided with a weak market environment.

In terms of the wider outlook for the Russian economy, GDP growth continues to contract amid low oil prices, high interest rates, high inflation, sagging business sentiment, and virtual isolation from external financing from Western capital markets due to financial sanctions. The IMF projects GDP to contract by 2.7% in 2015, before reaching 0.7% in 2016, and 2.5% in 2017.

Estimates are that net capital outflow in 2014 was $153 billion, compared with $61.6 billion in 2013. This continued in the first three quarters of 2015 as net capital outflow was $45 billion. Capital flight in 2015 is projected at $87 billion. We now have GDP contracting by 4.0% in 2015 and declining a further 0.8% in 2016. A modest recovery is seen taking hold in 2017, with growth at 1.2%. IHS Automotive forecasts that for the full year, light vehicle sales will decline by 34.8% year-on-year to 1.63 million units, and a further drop to 1.60 million units in 2016.