Delegates at LMCs seminar also heard about risks for the global auto industry in India, Thailand and South America, as well as in Russia/Ukraine.

Delegates at LMC's seminar also heard about risks for the global auto industry in India, Thailand and South America, as well as in Russia/Ukraine.

Russia's car market faces a slump that will last into 2015 according to the forecast analysts at LMC Automotive.

LMC forecasts that the Russian car market will decline by 10% in 2014 to 2.33m units and stay at around 2.3m units in 2015. This year's forecast car market decline follows a 5% drop in 2013.

Speaking at an LMC forecast seminar in London, LMC analyst Carol Thomas told delegates that the outlook for Russia's economy had deteriorated before the crisis in Ukraine.

"The Ukraine crisis means the outlook for the economy has worsened further," she said. "The crisis has further dented consumer and investor confidence. Private consumption growth - a key variable when looking at new car demand - in Russia was around 5% in 2013, but will slow to under 1% growth in 2014. There is not too much improvement either in 2015."

Thomas said that car demand in Russia is being squeezed by the depreciation of Russia's currency following capital flight as well as higher interest rates. "The depreciation of the rouble is putting upward pressure on car prices and interest rates have also moved up," she said.

While healthy manufacturer inventories kept car sales up in the first quarter, April's market drop is a sign of worsening market conditions to come. "Price increases are filtering through now and we are likely to see more prices rises in the summer," Thomas said. "And interest rates will not be coming down until 2015 at the earliest. Market conditions are set to worsen."

Government support for the car in the form of a loan interest subsidy scheme looks unlikely, Thomas said. "The government has said it will not introduced another scheme," she said. "Though I would not rule it out completely."

However, LMC maintains that the very long-term picture for Russia is one of growth based on a still relatively low level of motorisation. LMC projects that the Russian car market could reach 'maturity' with annual sales of 4.6m units.

Russia car market

sales (millions)
%ch
2013 2.596 -5.4%
2014F 2.331 -10.2%
2015F 2.314 -0.7%
Source: LMC Automotive