Car sales slip into higher gear

Russian car sales have rebounded from a disastrous 2009 on the back of an improved domestic economy and incentives to support local manufacturers.

The latest report from the Association of European Businesses (AEB) on Russian car sales shows that June sales jumped 45%, bringing the sector back towards pre economic downturn levels. That came on top of 3% growth in sales of passenger cars and light commercial vehicles during 1Q 2010, with car sales of 790 thousand.

The AEB says the governments’ cash for clunkers scheme, supporting domestic manufacturers with sales support through rebates, has been a key driver of sales. David Thomas chairman of the AEB automakers committee noted that consumers have been spurred to purchase cars by the government programs and affordable credit schemes.

"The state incentive programs continue to have positive effects on low-price segment, but currently there is obvious growth in all market segments. Availability of loan programs is also an important factor in the development of the market in the second quarter."

Another representative of the automakers committee, Arno Ribot, forecast car market growth in 2010 amidst an improving outlook.

"Our forecast in the 1 Q2010 amounted to 1.6 million vehicles; it is time to revise the forecast. Perhaps the sales will be higher than expected"

Vadim Mikhalev, senior consultant at ROLF, says the increase in sales stems from improved manufacturer offers, government support and a seasonal factor

“The rebound of the Russian economy and consumer appetites raises pushes manufacturers to boost their productivity. However, there is a fixed production plan and almost all resources have been loaded up. The only way to avoid fierce demand is to use the cost leverage. Nowadays, consumers can apply for a credit line with only 9% per year payments on credit and this provides more opportunities to buy new car. 30% of Ford cars are sold on credit. “

AEB automakers committee Vice-chairman, Martin Yan, believes the rebound in demand has to lead to improved production.

“The situation on the car market is facing sweeping changes with the growth of demand. The upturn is due to recovery of the macroeconomic situation in the country and increase of consumer optimism. Considering boosting of the demand on the car market the success of each brand depends on whether it can rapidly increase the production and delivery. We expect slight deficit of cars in the 3Q 2010 and a sharp increase in sales by the end of the year.”

According to the AEB, among domestically manufactured brands Russia the undisputed sales leader remained LADA with sales up to 23% comparing with the same period of 2009, with Chevrolet, Kia, and Ford posting strong sales growth in June.

What kind of incentive programs are offered by the distributors to persuade the customer to purchase?
“We use various marketing instruments and broaden our services, also we have good partnership relations with financial organizations and with their help we launch affordable schemes of purchasing. We have a developed chain of car services with qualified professionals and consultants – all that in a complex gives us advantages among the competitors.”

Rank in 1H 2010Rank in 1H 2009Brand1H 2010 sales (units)Change YoY, %June 2010 sales (units)Change month to month, %

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