Kremlin incentives are estimated to have seen 500,000 cars sold in Russia

Kremlin incentives are estimated to have seen 500,000 cars sold in Russia

Russian analysts say a gradually strengthening oil price may see the current crisis start to flatten out sometime this year, with estimates Moscow incentive schemes have seen 500,000 cars sold.

Last year saw sales dive 36% to 1.6m units last year, with the scale of the decline clear against a 2014 comparison of 2.49m, while some of the gloomiest forecasts are even predicting a 1.2m market for 2016.

"We are virtually at the bottom, it is so difficult to forecast, it is impossible," said Autostat analysis agency director, Sergey Tselikov at last week's Russian Automotive Forum (RAF) organised by Adam Smith Conferences in Moscow.

"It is the third year in a row Russia is showing a downturn and we dropped 36% [in 2015]. We used to be sixth or seventh, last year we were eighth and [in] 2015 we were on the 12th line. If we keep falling, we may go back to let Mexico ahead of us. This is bad, but this is some kind of new reality."

Although the market is undeniably problematic, Tselikov nonetheless praised automakers such as PSA Peugeot Citroen, which were staying the course despite the undoubtedly choppy waters and which were continuing to eye domestic components as a way to make their products more competitive.

"Take PSA," said Tselikov. "They keep believing and keep localising. This is a very good indicator people believe in this market. Buses are slightly better, but probably because of State procurement."

The analyst did not try to gloss over the situation however, pointing to consumers buying less coupled with a drop in purchasing power, as incomes were not growing and expenses continued to rise.

"Consumption behaviour is changing," added Tselikov, who also noted a shift to compact cars instead of more powerful variants. "People are not confident about the future, so [they] will keep driving [their] existing car.

"Why should I buy a new car? Times are tough. It is better to be safe than sorry, a good Russian proverb. Term of ownership is growing – people have money but are not willing to part with it."

Tselikov estimated Russian government incentive schemes had seen 500,000 cars sold and although he forecast consumption to still head on its downward trajectory this year, a stronger oil price should see some market stability.

"Oil is strengthening," he said. "Everyone expects a certain stabilisation of [the] oil price. It means the automotive market will not plummet any further and start levelling out.

"We will see even the first signs of growth this year."