Car makers look for 2010 demand growth

Car producers are optimistic about the future despite a disastrous 2009 which saw sales halve. But experts are already talking about the new reality on the car market.

2009 saw Russian car sales halve to just 1.5 million vehicles for the year – as the top gear, sales boom of previous years came to a halt.

The industry powered in to a sales gridlock – with the credit which had helped fuel the boom, drying up – the rouble devaluation slashing buyer spending power, and tariffs making imported cars more expensive still.

Russia was hit hardest by the global economic turmoil, despite massive discounts and buyer incentives.

But Martin Yan, Head of Volkswagen Russia is looking to boost production despite industry production also falling nearly 60%

“We expect that our sales and production will grow in 2010. We produced close to 50 thousand cars in Kaluga in 2009 and we hope to reach around 90 thousand in 2010.”

But increased production plans may have to idle for a while. Sergio Marchionne – Head of Fiat and Chrysler Group – says current production is well ahead of demand and the gap is only likely to increase in the coming year.

David Thomas, Chairman of the AEB Automobile Manufacturers Committee says Russian demand growth will return – but the production pattern will change.

“I think it will be a new pattern of development. I would be surprised over the next 3 year to see the growth pace we've seen from 2006, 2007 2008. I think the growth is likely to come back. You’ve got a lot of the components in place, you’ve got a low level of car ownership, you’ve got a relatively old profile of vehicles in use.”

The longer term outlook for Russian production is positive – with global carmakers still eyeing Russian bases and the Avtovaz restructuring likely to result in a leaner domestic champion. But with Russian buyers remaining under economic pressure, both sales and production will remain in low gear for the drive into 2010.