Tough year for Russia 2015 but growth expected 2016: Ernst & Young

Tough year for Russia 2015 but growth expected 2016: Ernst & Young

Moscow analysts are predicting a return to automotive sales growth in 2016 - but only after another tough 12 months next year.

The Russian market has endured consecutive months of significant decline this year, leading Volkswagen for example to stop production for five days recently.

Equally, with the Rouble coming under sustained fire, consumers are continuing their wariness as far as new car purchases are concerned.

Ernst & Young expects Russia sales to fall around 16% this year, with production down 8% for 2014 and a similar level for 2015, leading import volumes to fall faster than sales. However, sales next year are forecast to slow their fall to see a market down 4%.

Such a volatile situation is compounded by enduring political fragility in Russia as Moscow maintains its stand-off with Western capitals surrounding Ukraine and Crimea, while pressure on the Rouble shows no immediate sign of easing.

"There are [a] number of factors including the political situation and sanctions," Ernst & Young CIS Automotive Group Head, Andrey Tomyshev, told just-auto from Moscow. "This affects car sales and the exchange rate.

"I heard [President Vladimir] Putin promised [the] Russian Central Bank will stabilise the situation. One of the key reasons for the Rouble depreciation was speculative attacks and probably the Central Bank will smooth the effects."

Russia recently reintroduced a recycling or scrappage scheme, aiming to boost the domestic market by 70,000 cars, with reports Minister of Industry and Trade, Denis Manturov, could extend this beyond its initial New Year's Eve deadline.

"Overall expected decrease of car production for this year is not so considerable because Russian consumers are starting to switch from imported cars to locally-produced cars because of lower dependence on exchange rate fluctuations," said Tomyshev.

"That means on a decreasing market, the value of imported cars will not go down so fast."

The Ernst & Young Automotive Head estimated Russia would take "at least two years" to return to growth.