Forecasters at IHS Automotive have downgraded their forecast for vehicle sales in Russia this year as a result of the economic effects of the geopolitical crisis in Ukraine.
Russia’s car market has been in decline as the country’s economy has stalled, in part a reflection of developments in world energy markets. The Russian light vehicle market declined by 10% in 2013 and was recently forecast by the Moscow-based AEB to drop by a further 2% this year to 2.73m vehicles.
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IHS noted that things could be made much worse if economic sanctions are imposed on Russia. “All the current negative developments in Russian economy (rouble depreciation, inflation, lack of investments and capital outflow) will accelerate by possible sanctions from Western countries and organisations as a result of the dispute between Ukraine and Russia,” it said.
IHS also said that it will downgrade its light vehicle sales forecast for Russia. “For our base line we will slightly reduce our forecast from -3.8% market decline in 2014 (January Forecast) to -7% (March Forecast).”
IHS said that in the base scenario “we consider the implementation of intense diplomacy to resolve the Crimea conflict and some easing of the situation immediately after new presidential elections in May 2014.”
In its “pessimistic scenario” involving prolonged armed conflict in the region and implementation of sanctions against Russia, IHS said that Russia will suffer not only from sanctions “but also from deterioration of its image as a country to invest to”.
According to the pessimistic outlook, IHS said the light vehicle market in Russia will fall 10% this year and post a negative growth rate next year too.
