Automakers start up for new year in low gear

Russia automakers Kamaz and GAZ resume operations on Monday after a break for the New Year. The vehicle makers will now be running on reduced working weeks, as orders from industry collapse in the face of recession.

Russia managed to finish 2008 as Europe's second largest car market – after experiencing huge growth in the first half of the year, which slowed in the second.

According to the Association of European Businesses' Automobile Manufacturers Committee, Russian brands accounted for 29% of sales, and foreign brands 71%.

But they say a slowdown is the most likely scenario this year. The Central Bank's Rouble devaluation policy means the prices of imported goods – including automobiles – is going up.

And the government has also levied higher import tariffs for foreign-made vehicles – up 20 to 80 percent. David Thomas , AEB Automobile Manufacturers Committee Chairman & President Volvo Car Russia, says he’s looking for a level playing field for all manufacturers in Russia.

“We're pleased to see the increase in import duties has been applied or hasn't been applied to those brands manufactured in Russia, but I think we really need to see a level playing field within Russia to make sure those manufacturers that produce cars in Russia – who have factories, employ people, pay taxes in Russia – are treated the same as domestic manufacturers.”

Financing is a key issue – with credit more difficult to obtain – and offered at higher interest rates. Some 50% of vehicles sold in 2008 were sold with loans. Manufacturers are now looking at how to address the problems faced by consumers, according to Tor Berge, Vice President, Toyota Motor Russia.

“There is cooperation of course between the banks and the Government and also the players in the market. And we already have Toyota bank established in Russia. So of course we will use all these instruments to support our sales. Of course, it will be different, brand by brand.”

With the number of cars imported into Russia expected to fall in 2009, manufacturers are now hoping to set up second-hand sales networks through dealerships across the country.