Scrappage has boosted Russia sales, but continuing political tension exists

Scrappage has boosted Russia sales, but continuing political tension exists

Russia October new passenger cars and LCVs sales improved markedly last month as the effects of the country's recycling scheme fed through, although were still 10% down compared with 2013.

Sales in Russia dropped by 9,9% compared with October 2013 or by 23,116 sold units, totalling 211,365 cars, according to the Association of European Businesses (AEB) Automobile Manufacturers Committee (AEB AMC).

In January - October, 2014, new car and LCV sales declined by 12.7% or 289,869 items in comparison to the same period of the previous year.

"Market performance in October was anything but great, however, a step forward compared to the very weak results in recent months, said AEB AMC chairman, Joerg Schreiber.

"The reason behind the relative improvement is the combined effect of the scrappage incentive supporting the sales of domestic models and the sharp decline of the Rouble raising the short-term demand for imported models.

"The stimulating impact of these two factors will be only temporary, but for now appears to be carrying sufficient momentum to deliver a further improvement in the market sales statistics for November".

Ernst & Young in Moscow told just-auto it expected 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."

This year, 1,991,312 cars have been sold in Russia.