Subsidies bolster Russian auto market in H2 2013

Foreign OEMs partner with Russian automakers to boost production



Vehicle production and sales in Russia Since the beginning of 2013, the Russian auto market has been stagnant under the influence of the economic slowdown due to a drop in export of crude oil and other resources. In July 2013, the Russian government has launched a loan interest subsidy scheme to stimulate demand for cars. The subsidies have helped bolster the auto market as they mitigated some of the decline in sales. While it was reported that the scheme might be finished at the end of 2013, the market situation in 2014 depend on whether the government continues the scheme or not. In the long term, the Russian auto market is expected to grow further. In response to anticipated market expansion and the government's request to boost local production, a number of foreign OEMs are partnering with Russian manufacturers to set up production facilities in Russia.

 LMC Automotive disclosed a forecast for the Russian auto market in October 2013. After a 10.9% increase in 2012, the Russian light vehicle sales started to drop compared to year-ago levels in March 2013. Overall sales in 2013 will decrease to 2.81 million units, a drop of 4.3% from the previous year. Concrete reasons to explain the drop are difficult to identify. Speculation that the government would be looking to support the market is likely to have persuaded a number of potential buyers to hold back from the purchase of a new car. With the new loan interest subsidy scheme, which began operating on 1st of July and will run at least until 1st April, 2014 (as of October 2013), LMC Automotive expects the market improvement to continue at a steady rate during 2014, reaching 2.94 million units by the end of the year. Russian vehicle sales will continue to increase in 2015 and are expected to reach 3.31 million units in 2016.

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