Ford expects the Russian market to be flat in 2014 following a fall this year but is confident about the prospects for the long-term.
Ted Cannis, chief executive of the Ford Sollers joint venture, told the Reuters News Agency: “We are certainly concerned in the short term but it’s not a crisis although it’s certainly not going in the right direction. Equally, the government is clearly concerned also about where things are going and are taking some actions.”
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The new car market has fallen for the past seven months, causing the Association of European Businesses (AEB) to cut its 2013 sales forecast to 2.8m, down 5% from 2012. Slow economic growth has caused consumers to put off large purchases.
AEB’s September data showed Ford’s new car and LCV sales in Russia fell 19% in the first nine months of this year from the same period a year ago. Cannis declined to forecast 2015 Russia market sales or predict Ford’s own sales in the country.
In an attempt to boost sales, the government launched a scheme during the summer to subsidise credit-backed vehicle purchases. Reuters noted that although Russian households have relatively low debts, their borrowing costs are actually higher than in the US – at 20% of incomes – because much lending is short term at steep rates of interest.
Cannis added: “Long-term, the same fundamentals are in place as before – a large population, enormous amounts of resources that the world needs, car density at half of Germany or Spain.”
A recent Boston Consulting Group report said there are only 290 cars per 1,000 Russians versus 560 in Western Europe. Many of those vehicles are old although a decade of strong growth driven by Russia’s mineral wealth is slowly getting money into the pockets of more people.
The Ford Sollers venture is based in Khimki, Moscow, and has production facilities at Vsevolozhsk near St Petersburg and at Elabuga and Naberezhnye Chelny in Tatarstan. It has announced plans to invest US$274m in a new powertrain plant in Tatarstan, employing 500.
Cannis said the venture has invested more than US$350m so far in Russia and will invest “at least another couple hundred million” in 2014.
Next year Ford Sollers will add Edge and EcoSport production to the Focus, Mondeo, Kuga, Explorer, S-MAX, Galaxy, Transit and Tourneo Custom it already assembles.
