Further news growth in the Russian market has come from Renaissance Capital, the Moscow based investment group. Their automotive and transport team predict that Russia will be the #1 car market in Europe in 2008 with 3.3mln cars being sold.
Eduard Faritov, Transport Analyst at Renaissance Capital, said: “We are observing incredible change in demand with growing wealth: in 2003, 85% of cars sold were below $10,000 mark, in 2007 that was down to 26%. Furthermore, the market for cars priced above $20,000 is bigger in dollar terms than the sub-$20,000 segment.”
In 2007 the market grew 34% to 2.8mn cars and Renaissance’s analysts expect another 20% in 2008. The major growth drivers are continued growth in disposable income (11% per year since 2000), increased availability of loans, strong substitution demand and very low penetration of cars per ’000 people (188 vs 330 in Poland, and 500-600 in Western Europe).
The full Renaissance Capital report can be downloaded here
These finding are backed up the automobile companies themselves. Volkswagen CEO, Martin Winterkorn announced last year that Russia would become their largest market in 2009, overtaking Germany. Volkswagen, Peugeot Citroen, Nissan, Mitsubishi, Suzuki and Hyundai have all announced plans to grow their assembly plants in Russia; GM and Ford have been producing cars in Russia since 2002 and Toyota started production last year.
Russia is a particularly good market for car makers, as the second hand market is extremely under-developed at the moment, and dominated by unpopular older Russian-made models. Heavy taxes prevent older second-hand cars being brought over from Germany and other bordering countries. Manufacturers are except from these taxes as long as they import the car in pieces and assemble in Russia. These factors often make new car purchases the best or only option for Russians.