Imports still drive Russia's car boom

Last year saw record growth in Russia's car market. On Monday, Energy Minister Viktor Khristenko said the auto industry was a sphere of state interest, citing a 20% rise in domestic sales and more high-quality cars in the country.

The Russian car market has seen consistent growth over the past 15 years, reaching record levels in 2007. Last year saw new Russian brands, more imports of foreign-made cars, and the opening of new car factories.

Last year saw a 5% fall in sales of Russian cars – against a 57% increase in sales of foreign brands made in Russia.

The country’s import market has been growing steadily, with used-car sales up 46%, and new imports up 67% to over one million vehicles sold.

Stanley Root from PricewaterhouseCoopers, Moscow, says the growth in recent years has been staggering.

“There was a 35% increase in the number of cars bought, but there was a 67% increase in the dollar amount of money spent on cars – up to about $US 53 billion.  That makes it a huge market. Going back to 2002, the total market was just $10 billion,” Root said.

People in Russia are spending more and more money on cars and on services for them – up 14% in 2007 alone. 

The automobile market is not only growing, but evolving. The evolution of the Russian consumer is seeing higher demand for quality.  It’s transforming not only the vehicles built in the country, but also the brands and models being imported. 

However, as driver-demand is satisfied, the insustry could see a drop in sales.

“Obviously such spectacular growth rates are impossible to keep in the future, and already next year we expect there will be a slight decline in the growth rate .This is natural considering the ramping up of production facilities and higher competition will lead to gradual saturation of the market,” Ivan Bonchev of Ernst & Young said.

Few analysts have a clear answer on how the country can improve its infrastructure to keep pace with traffic growth. And at the moment that looks like the only obstacle to the further development of Russia's motor industry.