18 September 2012Russia has taken the lead in terms of car sales in Europe last August and surpassed Germany, which had experienced a decline in sales over the summer season.
For the most part, the situation hardly surprised experts in the industry, as the unprecedented expansion of Russia’s car market has been noted for quite a while. There was speculation, however that the country was to top the ratings no earlier than in 2014.
According to the Association of European Businesses, the auto market in Russia soared 15% in August to 258,700 passenger cars and light-commercial vehicles. Tangible expansion in the country coupled with sluggish growth in Germany helped to speed up the process, underpinning Russia’s aspirations to become Europe’s top market in car sales.
The question now is whether the country will be able to maintain the gained momentum, and finish out the year on top. “In August, Russia became the largest car market in Europe, but currently this is a temporary phenomenon. This is partly driven by seasonality in Germany, as August is traditionally a weak month there. For the full year, Russia will still be second. On the other hand though, and this is the most important, the dynamics reflect mid- and long-term trends. I would expect that Russia would overtake Germany as the number one European market, closer to the end of next year and definitely in 2014,” Vladimir Bespalov, an analyst at Moscow-based VTB Capital said in phone interview to the Voice of Russia last week.
Arguably, those placing hopes on Russia’s bright future have solid grounds for optimism. The Wall Street Journal reported that, “total industry sales in Russia rose 70% last year to nearly $60 billion.” Many global car giants including GM and Volkswagen committed huge sums to establish their footprint in the country. The former unveiled its strategy, positing that the company would invest $1 billion in Russian production facilities, while the latter has already poured over 1 billion euros to building an energy plant in the country.
Additionally, with Russia’s WTO accession in mind, many car manufactures hoped the country would fling its doors open for increased competition. In reality though, while cutting import tariffs the government introduced an equally high auto-recycling tax on vehicles. Consequently, a long-awaited drop in prices turned out to be a myth.
While many industry specialists highlight a strong growth of car sales in Russia, others wonder whether a minor effect of the WTO entry on actual price of vehicles will soon deter investors.
Anton Mirov, a thirty-two year old businessman living in St. Petersburg bought his new Toyota in August. “I picked a car in February this year, but decided to wait, knowing that import tariffs would decline after the WTO entry. Then a few friends told me about the new utilization fee law, saying that it may spur a large price increase for all vehicles. At that point, I decided to buy a car before this legislation went into force,” explained Anton by phone.