Russia’s automotive industry will continue to struggle over the next few years with little likelihood of reaching previous peaks anytime soon according to an analyst at LMC Automotive speaking exclusively to just-auto.
The Russian automotive sector, once viewed as an emerging market with very strong demand and production prospects, has come under pressure as the economy and vehicle market has contracted. The Russian light vehicle market peaked at around 3m units in 2012 but then fell to 1.4m units in 2016 and is running at under 2m units this year.
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LMC Automotive analyst Carol Thomas says that recent developments in the global economy – and what might happen to energy prices – have led LMC to trim its forecasts for Russia’s auto sector.
“Our own projections for Russian sales in 2020 and beyond have been trimmed again in recent weeks as fears of a global recession – which would undoubtedly lead to a fall in oil prices – grow,” she says. “The list of negative influences that are holding back demand is extensive. International sanctions, slow income growth, currency weakness and high interest rates are weighing heavily upon already fragile consumer confidence,” Thomas adds. She also maintains that Russia government incentives have been “less supportive than hoped and demographic trends are not helpful”.
“It is difficult to see much scope for auto sales to regain their previous peak anytime soon,” she says.
A number of manufacturers in Russia have reduced their operations in recent years (GM shuttering its St Petersburg facility and Ford shutting two plants). Despite manufacturing adjustments, Thomas maintains that overcapacity remains a problem for the sector. “The market is still sluggish and the addition of new plants for Mercedes-Benz and Great Wall will only add to the problem,” she points out.
She also warns the global picture will be adding to pressures for OEMs in Russia. “As the global demand outlook becomes increasingly stormy, OEMs may well be looking for cost-cutting options,” she says. “In a period of considerable technological transition, further casualties in Russia cannot be ruled out.”
See also: Mercedes-Benz Cars begins E-Class assembly in Russia
