Russian market expected to grow from 2017 due to higher oil prices and stronger ruble

Government continues to support auto industry with incentives

2017/05/12

Summary

Vehicle production and sales in Russia

  Russian vehicle sales in 2016 decreased 11% year-over-year (y/y) to 1.43 million units, a 51.4% drop from the record high of 2.94 million units recorded in 2012. The market has been stagnant due to a recession caused by economic sanctions by Western countries over the Ukraine crisis, falling oil prices, and a weak ruble.

  The economy is expected to show signs of recovery in 2017 after oil prices rebounded and the ruble stabilized against the dollar. The Association of European Businesses (AEB) released a forecast in January 2017 stating that vehicle sales for 2017 would rise 3.8% y/y to 1.48 million units. Nevertheless, the Russian market may remain unstable due to other issues affecting the economy including the Syrian conflict.

  In 2017 the Russian government has continued to implement incentives to bolster the auto industry. In 2016 the government spent RUB 46.8 billion to fund incentives for purchase of 620,000 vehicles. A budget of RUB 62.3 billion has been earmarked for further measures to support vehicle demand in 2017.

  Russian vehicle production in 2016 fell 5.4% y/y to 1.31 million units, a 41.6% decrease from a record 2.24 million units in 2012. While production capacity in the country reached around 3.2 million units per year, production volume declined as a result of lower domestic demand. The Russian government has been enacting measures to promote export of Russian-built vehicles and subsidize a portion of the costs for automakers to increase production volume. The Ministry of Industry and Commerce released a forecast in March 2017 that stated vehicle production for 2017 would increase 7.0% y/y to 1.4 million units.

  Amidst prolonged recession in Russia, some OEMs reduced their production volume and withdrew from the country, while other automakers enhanced their production facilities and expanded their assembly model ranges in anticipation of mid- and long-term growth in the market. Daimler is building its first plant in Russia and will start operations there in 2019. The Chinese OEM Lifan Motors plans to begin production at a new plant with an annual production capacity of 60,000 units in 2017. Ford and VW each opened engine plants in September 2015. Mazda also plans to start operations at a new engine plant in 2018.

  According to LMC Automotive's latest forecast (Q1, 2017), Russian economic growth is expected to turn positive in 2017, but consumer spending will still be very weak and this is likely to hold back any recovery in the light vehicle market until the second half of the year. Light vehicle sales in the region are expected to increase by 6.7% y/y to 1.52 million units in 2017. Sales will grow steadily after 2017 and reach 2.06 million units in 2020.

Related Reports:

Russian automotive market slump continues; recovery not expected until 2017 (May 2015)



January-March sales grow in 2017 for the first time in 4 years

Vehicle sales and year-on-year rate in Russia

  Monthly vehicle sales in Russia decreased y/y from December 2014 to October 2016 due to the sluggish economy. The double-digit drop continued from May to September 2016, and October saw a single-digit drop for the first time in 6 months. This was largely a result of government incentives. Sales grew from October to the end of 2016 because many consumers decided to purchase vehicles before the budget for incentives ran out. Sales increased in November for the first time in nearly 2 years and fell only a small amount in December. The auto market was considered to have bottomed out.

  After Donald Trump was inaugurated as the new U.S. president in January 2017, the ruble stabilized against the dollar (Note) under the expectation that economic sanctions on Russia would be lifted. As oil prices are also climbing, vehicle sales increased 9.4% y/y in March following slight drops in January and February. As a result, January-March sales rose 1.0% y/y in 2017, registering the 1st growth on a quarterly basis in 4 years. AEB commented that more solid monthly results would be needed before this could be called a robust trend.

(Note) Russia's currency plunged to its lowest level ever at RUB 78 to the dollar in January 2016. It returned to RUB 56 in mid-April 2017.

Vehicle production and sales in Russia

(Units)

2013 2014 2015 2016 2017
(Outlook)
Jan.-Feb
2016
Jan.-Feb.
2017
Production of vehicles 2,182,973 1,893,365 1,383,438 1,308,230 1,400,000 166,874 205,300
Production of passenger cars 1,919,143 1,692,505 1,215,972 1,124,774 1,200,000 149,392 187,000
Production of commercial vehicles 263,830 200,860 167,466 183,456 207,000 17,482 18,300
Sales of vehicles 2,777,447 2,491,404 1,601,527 1,425,791 1,480,000 193,226 184,574
Source: ASM Holdings for production; Association of European Businesses (AEB) et al. for sales
(Note) 1. Sales do not include heavy-duty trucks.
2. The production outlook for 2017 represents the Ministry of Industry and Commerce's forecast that was released in March 2017; The sales outlook represents an AEB forecast released in January of the same year.
3. January-March sales totaled 319,220 units in 2016 and 322,468 units in 2017.


Russian government earmarks RUB 62.3 billion for incentives

  The Russian government has been implementing measures to bolster the stagnating auto industry. It subsidized car loans and scrappage incentive schemes to support demand, and these measures were applied to purchases of around 620,000 vehicles in 2016. Moreover, RUB 90 billion was allocated for aiding assembly operations with measures to lower the financial burden on automakers and export subsidies. The government has earmarked RUB 62.3 billion for demand stimulus measures in 2017.

  In December 2016, the Ministry of Industry and Commerce announced an updated strategy for auto industry development for the period until 2025. It formulated several objectives that include increasing exports by 50% by the end of 2018, expanding production, and putting more emphasis on research and development to produce more automotive components in Russia.

Government's incentive measures in 2016 to support purchases of 620,000 vehicles

Objectives Measures Budget Covered vehicles
Demand stimulus Subsidized car loans RUB 11.3 billion 270,000 vehicles
Vehicle fleet renewal via trade-ins and scrappage RUB 22.5 billion 320,000 vehicles
Subsidized car leasing RUB 5 billion 32,000 vehicles
Others RUB 8 billion -
Subsidies for assembly operations Lowering the financial burden on carmakers RUB 41.3 billion -
Subsidizing a portion of costs for personnel expenses RUB 46.29 billion -
Export subsidies RUB 3.3 billion -

Government support measures for 2017 (planned)

The Russian government plans to earmark RUB 62.3 billion to support the automotive industry in 2017. RUB 10 billion will be allocated for traditional measures that subsidize car loans. In addition, RUB 17.4 billion will be spent on new subsidy programs for certain types of consumers such as first-time buyers and big families.
Source: Analytical Center for the Government of the Russian Federation March 2, 2017

Ministry of Industry and Commerce: Strategy for development of automotive industry until 2025 (announced in December 2016)

According to the Ministry, vehicle production capacity in Russia reached 3.2 million units per year at the end of 2016 while domestic demand fell by 40-45% from its peak. In order to increase production volume, two key programs need to be implemented: (1) development of exports: increasing exports 50% by the end of 2018 by means including long-term government support; and (2) stimulation of component production: while localization rates of passenger car parts range from 30 to 55%, more emphasis should be put on research and development to expand component production.

Russian and Vietnamese governments agree on vehicle production joint ventures

Russia and Vietnam signed an inter-governmental protocol for vehicle production in March 2016. Russian automakers including KAMAZ, GAZ, UAZ, and Sollers will set up a number of joint ventures with their Vietnamese partners to manufacture and assemble trucks, buses with more than ten seats, SUVs, and special-use vehicles in the Southeast Asian country. The joint ventures are required to achieve the local procurement rates determined for every product within ten years and transfer technologies and provide training to Vietnamese engineers.


Passenger car/LCV sales by OEM

  AvtoVAZ's sales sharply declined in 2013-2015. However, its sales decreased only 1% y/y in 2016 with its market share expanding by 1.9 percent point to 18.7%. The success of the new Lada Vesta and XRAY, which had been developed with the Renault-Nissan Alliance, boosted the Russian maker's overall sales.

  Hyundai Group's sales also fell 22.2% in 2013-2016, but its rate of decline was smaller compared with AvtoVAZ's 41.6% and VW's 46.6%. The Korean automaker's sales surpassed AvtoVAZ's in 2015 and it gained a market share of 20.7% in 2016. The Hyundai Solaris, a sedan designed for Russia, and the Kia Rio subcompact car have proved popular and were ranked as 1st and 3rd among the best selling models in the country for 2016.

Passenger car/LCV sales by
OEM in Russia Passenger car and LCV
market share in Russia


Export of Russian-built vehicles

  With the prolonged market downturn in Russia, many automakers are striving to expand exports of the vehicles they produce in the country. Export markets include the Commonwealth of Independent States (CIS) countries such as Kazakhstan and Belarus, as well as the Middle East and Latin America. The Russian government intends to increase vehicle exports 50% by the end of 2018.

Kazakhstan

Nissan
Datsun brand models
Nissan launched Datsun brand vehicles produced in Russia in Kazakhstan for the first time in December 2015. Among CIS countries, Kazakhstan is the 2nd nation where Nissan sells Datsun models following Russia. The Datsun models introduced in Kazakhstan include the on-DO compact sedan and mi-DO five-door hatchback version, which are manufactured at AvtoVAZ's Togliatti plant.
Ford
New Fiesta
Ford Sollers began exporting the new Fiesta (sedan and five-door hatchback versions) built at its Naberezhnye Chelny plant in the Republic of Tatarstan to Kazakhstan in February 2016. The Ford vehicles that have been exported to the country include an EcoSport produced at the same plant; the Focus and Mondeo from the Vsevolozhsk plant; and a Transit, Explorer, and Kuga from the Yelabuga plant.

Belarus

Ford
New Transit
Ford Sollers started exporting a new Transit built at the Yelabuga plant to Belarus in June 2016. After Kazakhstan, Belarus is the 2nd largest export market for the joint venture's Russian-built vehicles. Export deliveries to Kazakhstan began in November 2014. Ford Sollers used to export European-made vehicles to Belarus. In the future, it plans to export the Focus, Mondeo, Explorer, and EcoSport from Russia to Belarus.

Iran

GAZ
900 buses
In December 2016 the GAZ Group signed a memorandum of understanding with the mayors of Iranian cities including Tabriz, Karaj, Qom, and Urmia on supplying 900 of its buses. The Russian company will deliver buses manufactured by LIAZ, its subsidiary, for public transportation agencies in Iran. The parties agreed to sales of finished products and delivery of CKD kits after the GAZ group's assembly plant is established in the country. Deliveries are scheduled to begin in 2017.

Egypt/Lebanon

Hyundai
Solaris
Hyundai Motor started building a Solaris sedan designed for Egypt and Lebanon at its St. Petersburg plant in August 2015. The vehicles for the 2 countries are equipped with special air conditioning systems and batteries for hot climates. It was estimated that more than 4,000 units were transported by sea to the countries in 2015.

Mexico

VW
Polo
In August 2016, VW stated that it has begun exporting a Polo sedan built at its Kaluga plant to Mexico. Initially, it exported only a few hundred vehicles. As the Russian market has been stagnant, VW is considering all possible export opportunities.

Europe

Nissan
components
Nissan began exporting front and rear bumpers for the X-Trail from its St. Petersburg plant in September 2016. The components are shipped to its warehouse in Amsterdam, the Netherlands, which handles all spare parts for the European market. These exports will help Nissan lower the prices of replacement bumpers, which it previously delivered from Japan. It plans to export 6,000 and 10,000 bumpers in 2016 and 2017, respectively.

Others

UAZ In March 2017, UAZ disclosed a plan to increase its exports to 20,000 units per year within the coming 3 years. The export volume will account for approximately 30% of its annual sales. Prospective export markets include Southeast Asia, the Middle East, and Latin America.


Renault-Nissan-AvtoVAZ

AvtoVAZ's activities

Operational loss reduced in 2016 AvtoVAZ's sales volume for 2016 totaled 266,296 units, a 1% drop y/y, despite the 12% shrinkage in the Russian car market. The success of the new Lada brand models bolstered its sales. Lada's share in the Russian passenger car market expanded by 1.9 percent point to 18.7%. The automaker's revenue increased 4.8% y/y to RUB 184.9 billion. Its operational loss before depreciation and restructuring costs amounted to RUB 15.6 billion, a 36.8% decline from the previous year.
Recapitalization plan In September 2016 AvtoVAZ's board of directors announced a recapitalization plan for RUB 85 billion. After its extraordinary general shareholders' meeting approved the plan in October, the automaker increased its capital by RUB 25 billion through open subscription in December of the same year. It intends to accomplish strategic goals in the form of gaining a market share of 20% or more, achieving positive free cash flow, increasing export volumes, and raising local procurement rates.
Production of Renault-Nissan's HR16 engine AvtoVAZ received approval from the Renault-Nissan Alliance for full-cycle production of 1.6-liter HR16 engines in January 2017. A new aluminum casting plant and automatic machining lines were installed at its Togliatti plant for new process operations related to production of the engines. The plant renovation allowed the automaker to implement casting of cylinder blocks and cylinder heads as well as machining of aluminum parts and crankshafts. The production capacity for H16 engine at the Togliatti plant is 150,000 units per year. According to AvtoVAZ, this is currently the only foreign engine produced in Russia with such deep localization.
Production in Kazakhstan At Asia Auto's Oskemen (former Ust-Kamenogorsk) plant in Kazakhstan, AvtoVAZ started production of its Lada models in succession in 2016: the Lada Granta compact sedan, Kalina compact car, and 4x4 5d SUV in June; the Priora compact car in August; and the Vesta compact sedan and new XRAY SUV in December. This plant has been manufacturing the Lada 4x4 and 4x4 Urban SUVs.

AvtoVAZ: new model launch plan

Lada Vesta The new Vesta compact sedan, a successor of the Priora, was launched in November 2015. It uses a new B/C platform developed with the Renault-Nissan Alliance. The initial level of localization reached 71%. Most of the components including engines and transmissions are produced at AvtoVAZ's Togliatti plant. The model comes with a 1.6-liter gasoline engine (106 hp) mated to Renault's five-speed manual transmission. It is built at Izh-Avto's Izhevsk plant.
Lada XRAY The Lada XRAY, a new compact SUV, was released in February 2016. The SUV is underpinned by a B0 platform developed jointly with the Renault-Nissan Alliance and adopts more than 500 original parts. The current level of localization is 50% and AvtoVAZ plans to raise it to 70% in the future. RUB 12 billion was provided by the Bank for Development and Foreign Economic Affairs (VEB) to fund model development. The XRAY is produced at AvtoVAZ's Togliatti plant.
Lada Vesta compact sedan Lada XRAY compact SUV
The new Lada Vesta compact sedan (Photo: AvtoVAZ) The new Lada XRAY compact SUV (Photo: AvtoVAZ)

Nissan's activities

Production of Qashqai Nissan started production of the Qashqai compact SUV at its St. Petersburg plant in October 2015. The SUV used to be imported from the company's Sunderland plant in the U.K. Moreover, production of the Teana at the plant was discontinued since sales of D-segment sedans sharply decreased in Russia. In addition, the plant reduced the number of shifts from 2 to 1, which led to layoffs of approximately 500 employees in the spring of 2016.
Production of new Murano Nissan began building the third-generation Murano at its St. Petersburg plant in June 2016. The model comes in two versions: a standard type equipped with a 3.5-liter V6 engine mated to an Xtronic CVT; and a hybrid type adopting a supercharged 2.5-liter petrol engine combined with a 15kW motor. It is sold not only in Russia but also in Kazakhstan and Belarus. Nissan invested EUR 167 million for manufacturing the new Murano and doubling the production capacity at its St. Petersburg plant.
Operations of stamping shop Nissan started operations of a new stamping shop at its St. Petersburg plant in August 2015. The new shop has an area of 9,200 square meters and is connected with a warehouse of 4,300 square meters that can store up to 50,000 stamped parts. The shop manufactures body panels for the Qashqai, X-Trail, Murano, and Pathfinder, which are assembled at the St. Petersburg plant.

Renault launches Kaptur in Russia

Renault launched the new Kaptur crossover in Russia in June 2016. The Kaptur is slightly larger than the Captur, which is sold mainly in Europe. The Kaptur comes with a 1.6- or 2.0-liter gasoline engines. The 1.6-liter model is equipped with a front-wheel drive system and the 2.0-liter model with a four-wheel drive system. The crossover is produced at Renault's plant in Moscow.


Kamaz

Kamaz reenters Iranian market

Kamaz announced that it would reenter the Iranian market in February 2016. The Russian OEM initiated entry into Iran in 2002 and started assembly of its trucks there in 2005. However, it discontinued production in 2010 due to the introduction of economic sanctions. Over 2,000 Kamaz trucks were sold in Iran before 2010. After regaining certification, the company began assembling trucks using knockdown kits in 2016. It has a plan to enhance sales in export markets including Vietnam, Iran, Indonesia, Egypt, and Peru in the next five years.


Hyundai Motor

Hyundai Motor's activities

Launch of new Solaris Hyundai Motor launched a new Solaris compact sedan designed for Russia in February 2017. This is the first redesign of the sedan since its release in 2011. The Solaris sold a total of 640,000 units in Russia since its debut. In 2016, the model ranked first in terms of annual sales at 90,380 units in the country. The second-generation Solaris is slightly larger than its predecessor, featuring a new front grille and LED lights. An infotainment system that supports Apple CarPlay and Android Auto was also added.
Production of Creta Hyundai Motor began production of the new Creta compact crossover at its St. Petersburg plant in August 2016. It was estimated that 20,000 units of the model were built in 2016. The Korean automaker invested USD 100 million in modernization of the production lines.


U.S. and European OEMs in Russia: GM, Ford, VW, Daimler, and BMW

GM-AvtoVAZ's activities

One-shift operations at Togliatti plant GM-AvtoVAZ reduced the number of shifts from 2 to 1 at its Togliatti plant that produces the Chevrolet Niva SUV from February 24, 2016. Its annual production plan was retained even with 1-shift operations since production-line speed was raised during the holidays. Production at the plant fell 24.5% y/y to 34,555 units in 2015. 2016 output also declined 3.0% y/y to 33,520 units.
Production of Chevrolet Niva in Kazakhstan GM-AvtoVAZ began serial production of the Chevrolet Niva at SaryakaAvtoProm, a local company, in Kazakhstan in April 2017. Car assembly kits are supplied from GM-AvtoVAZ's Togliatti plant in Russia. Kazakhstan is one of the most significant export markets for GM-AvtoVAZ. Localization of car assembly will increase the competitiveness of the Chevrolet Niva in the Kazakh market. SaryakaAvtoProm produces SsangYong, Toyota, Geely, and Iveco vehicles in Kazakhstan.

Ford's activities

Start of operations at new engine plant Ford Sollers started operations at its newly constructed engine plant in Yelabuga, the Republic of Tatarstan, in September 2015. The overall investment amounted to USD 275 million. The plant currently has an annual production capacity of 105,000 units, with the possibility for further expansion of up to 200,000 units a year. Three versions of 1.6-liter Duratec engines (85 ps, 105 ps and 125 ps) are produced. At least 30% of Russian-built Ford vehicles will be equipped with these locally built engines. Ford has already installed the Russian-built engines in the Fiesta, EcoSport and Focus.
Production of new Kuga Ford Sollers started building the new Kuga compact SUV at its Yelabuga plant in December 2016. The new Kuga for Russian customers comes with a 1.5-liter EcoBoost gasoline engine that offers a choice of two power ratings (150 hp/182 hp) or a 2.5-liter engine (150 hp). The model comes with either front- and all-wheel drive. Approximately 52,000 Kuga vehicles have been sold in Russia since its launch. In 2016, its sales increased by 21% from the previous year.

VW's activities

Start of operations at new engine plant VW started operations at its new engine plant in Kaluga in September 2015. The total investment amounted to EUR 250 million. The new plant is located next to an existing assembly plant and produces 1.6-liter EA211 petrol engines. The annual production capacity is 150,000 units. The engines are used for the VW Polo and Skoda Rapid built in Kaluga as well as for the VW Jetta and Skoda Octavia and Yeti produced in Nizhny Novgorod. At least 30% of the vehicles built by the VW Group in Russia have been equipped with engines produced locally as of the end of 2016.
Production of new Tiguan VW began production of the second-generation Tiguan at its Kaluga plant in November 2016. The model went on sale in the first quarter of 2017. The new Tiguan became the first VW Group SUV built on the modular transverse matrix platform (MQB). The automaker invested EUR 180 million in the Kaluga plant to build a new body shop and to update paint and assembly shops for production of the new Tiguan. The Kaluga plant has an annual production capacity of 225,000 units.

Daimler to start operations at its first plant in Russia in 2019

In February 2017, Daimler unveiled plans to build its first plant in Russia to produce the Mercedes-Benz SUVs and E-Class sedan. EUR 250 million will be invested to construct the new plant at the Esipovo industrial park, located 40km northwest of Moscow. It is scheduled to start operations in 2019. The plant will carry out all production steps, from the body shop through painting and assembly, with a flexible assembly line. More than 1,000 jobs will be created.

BMW launches Russian-built X4

BMW launched an X4 crossover SUV built from semi-knockdown kits in Russia in June 2015. Its local partner Avtotor assembles the X4 at its Kaliningrad plant using kits imported from BMW's U.S. plant in Spartanburg. The SUV comes with a 2.0-liter gasoline engine that has a choice of two power ratings (184 hp/245 hp) or a 2.0-liter/3.0-liter diesel engine.


Chinese OEMs in Russia: Chery, Lifan and Great Wall

Chery Automobile launches new Tiggo 3 in Russia

Chery Automobile launched the new Tiggo 3 compact SUV in Russia in March 2017. The automaker already sells Tiggo 5 built from kits at Derways Automobile's plant in Cherkessk, Karachai-Cherkess Republic. The new Tiggo 3 is 4,420 mm in length and provides 1,030 mm of head room in the front with 550-1800 liters of trunk space. The Chinese manufacturer will continue to enrich its SUV line in Russia with new products including the Tiggo 2 and Tiggo 7.

Lifan Motors to build new plant in Russia

Lifan Motors started construction of a new plant in Lipetsk, western Russia, in June 2015. With an investment of USD 300 million, the new plant, including body, paint, and assembly shops, will be completed in 2017. The annual production capacity is 60,000 units, which will be expanded by phases up to 200,000 units. According to its Intelligent Blue Strategy (new energy strategy), Lifan plans to build 300,000 electric and hybrid vehicles per year by 2020. The automaker has developed batteries adapted to the cold climate in Russia and intends to launch its electric and hybrid vehicles in the country in the near future.

Great Wall Motor to start operations at new plant in 2018

Great Wall Motor announced a plan to build an assembly plant in Tula in 2014 that was originally scheduled to start operations at the end of 2017. According to various media reports, the automaker will postpone the start of operations to 2018. The total investment amounted to USD 500 million. The initial annual production capacity is 70,000 units, which will be expanded by as much as 150,000 units by 2020. The new plant is to produce Haval brand vehicles.


Japanese OEMs in Russia: Toyota, Mazda, and Honda

Toyota's activities

Production of RAV4 Toyota started production of the RAV4 compact SUV at its St. Petersburg plant in August 2016. RUB 9.7 billion was invested and around 800 new jobs were created. The RAV4 became the 2nd model to be built at the St. Petersburg plant together with the Camry. The annual production capacity was doubled from 50,000 to 100,000 units in preparation for the start of production of the RAV4. The SUV sold 16,169 units for the first half of 2016 and ranked 1st among all Toyota vehicles going on sale in the Russian market. Like the Camry, the RAV4 is not only sold in Russia but also exported to Kazakhstan and Belarus.
Termination of Prado production in Vladivostok Toyota ended production of the Land Cruiser Prado in Vladivostok at the end of June 2015. Sollers-Bussan, a joint venture between Japanese trading firm Mitsui & Co and Russian automaker Sollers, had been building around 1,000 units of the Prado per month since February 2013, but decided to discontinue its local production for the medium and long term due to stagnant economy in Russia. Toyota started imports of  Prado CBUs to Russia from Japan after July 2015.

Mazda to start operations at new engine plant in 2018

Mazda Sollers Manufacturing Rus (MSMR), a joint venture production company between Mazda and Sollers, signed a special investment contract with the Russian government regarding the construction of an engine plant. MSMR plans to build an engine plant with an annual capacity of 50,000 units next to its car assembly plant. Operations at the new engine plant are scheduled to start in 2018. The Russian government will offer support measures until 2023.

Honda's Russian office ceases import of new vehicles in 2016

Honda Motor Rus (HMR), Honda's Russian affiliate, ceased importing new vehicles at the beginning of 2016. Instead, local Honda dealers now import vehicles directly from Honda in Japan. The automaker does not have production facilities in Russia, and thus, HMR used to be responsible for the import of new vehicles. Although HMR continues to import replacement parts and provide after-sale services, some observers think that the company is withdrawing from the Russian market. Honda's vehicle sales sharply fell from 21,761 units in 2014 to 5,343 units in 2015 and 1,910 in 2016.


Commercial vehicle manufacturers in Russia: Isuzu and GAZ

Isuzu's activities

Start of heavy-duty truck production Isuzu Motors plans to start knockdown production of heavy-duty trucks at Isuzu Rus, its Russian production and sales subsidiary, in 2017. The company currently exports the heavy-duty trucks from Japan. It intends to reduce import duties and delivery costs by assembling them in Russia. Isuzu Rus has already started knockdown production of medium- and light-duty trucks.
Sollers-Isuzu becomes consolidated subsidiary Isuzu Motors increased its stake in the CJSC Sollers-Isuzu joint venture and made it a consolidated subsidiary. Previously, Sollers-Isuzu was owned 45% by Isuzu, 5% by Sojitz and 50% by Sollers. After the 50% held by Sollers was transferred to Isuzu and Sojitz, Sollers-Isuzu is now owned 74% by Isuzu and 26% by Sojitz. This deal allows Isuzu to exercise leadership in boosting its businesses in Russia. As a result, Isuzu will enhance its commercial vehicle brand, product line-ups and sales.
Comprehensive alliance with GAZ Isuzu Motors signed a memorandum of understanding regarding a "strategic and comprehensive alliance" between the following 3 parties: Russian Machines, a part of Basic Element, which is one of the largest Russian diversified industrial groups; GAZ Group, an affiliate of Russian Machines and a major Russian commercial vehicle manufacturer; and ITOCHU Corporation, a leading Japanese trading company. Isuzu will investigate the possibility of cooperation in development, production and sales of GAZ vehicles and supply of engines and other components.

GAZ's activities

Start of CNG engine production GAZ started production of YaMZ-530 compressed natural gas (CNG) engines at its Yaroslavl plant in November 2016. The in-line 4- and 6-cylinder engines meet Euro 5 and Euro 6 emission standards. The CNG engines can be used in vans, trucks, passenger cars, road construction and agricultural vehicles. The Yaroslavl plant has an annual production capacity of 20,000 CNG engines, with the possibility for expansion of up to 40,000-50,000 engines.
Production of stamped parts for Mercedes-Benz Sprinter GAZ began serial production of stamped parts for the Mercedes-Benz Sprinter commercial van at its Nizhny Novgorod plant in October 2015. GAZ has been building the Sprinter since July 2013. Previously, stamped parts were imported from non-CIS countries to Russia. The local content of the Sprinter will be raised by using components produced in the country.


Production forecast by LMC Automotive: Russian light vehicle production to increase to 1.74 million units in 2020

(LMC Automotive, February 2017)

Russian light vehicle production forecast

  LMC Automotive expects that Russian light vehicle production will expand to 1.32 million units in 2017, up 7.3% year-over-year. The Russian government will again support the automotive industry in a number of ways, notably via incentive schemes designed to boost sales as well as export subsidies and direct funding to the OEMs themselves. The Ministry of Economic Development has adopted a volume target for exports of 300,000 units by 2020 and 500,000 shortly thereafter, although these goals are ambitious in view of the deterioration in exports in recent years. Light vehicle production in the region is expected to grow after 2017 and reach 1.74 million units in 2020.

  AvtoVAZ plans to start production of the Lada Vesta wagon at the Izhevsk plant in August 2017 and the Vesta Cross is expected to follow later. Output of both derivatives is likely to be in the region of 5,000-8,000 units in 2017, rising to 17,000 in 2018. Other key new models for AvtoVAZ include a more robust version of the X-Ray, known as the X-Ray X (HGA), from 2018 and the X-Code crossover towards the end of 2020.

  Overcapacity remains a massive issue in Russia. Total light vehicle capacity is estimated to be in the region of 3.3-3.5 million, meaning that capacity utilization was pitifully low in 2016 at around 36%. Although this figure is set to improve over the forecast period, the weak domestic demand outlook means that it is unlikely to go much above 55-60% by 2024.

Russian light vehicle production forecast by make

(Units)

SALES GROUP GLOBAL MAKE 2014 2015 2016 2017 2018 2019 2020
Total 1,822,322 1,320,191 1,230,916 1,320,208 1,503,307 1,694,162 1,740,264
Renault-Nissan Group Lada 390,324 305,631 280,895 314,780 381,523 437,767 445,841
Dacia 188,897 124,516 105,735 98,062 98,696 102,552 104,016
Nissan 98,574 78,643 62,436 68,457 75,230 73,866 94,380
Renault 13,379 2,006 17,851 29,840 49,292 82,475 79,863
Datsun 18,273 31,176 14,530 23,049 27,442 32,903 32,785
Mitsubishi 32,707 20,759 13,685 10,638 14,380 16,520 15,838
Infiniti 813 0 0 0 0 0 0
Renault-Nissan Group sub-total 742,967 562,731 495,132 544,826 646,563 746,083 772,723
Hyundai Group Hyundai 139,362 136,916 131,722 148,172 165,174 176,298 177,224
Kia 199,057 166,243 151,052 142,349 151,029 146,670 120,090
Genesis 0 0 845 552 577 684 758
Hyundai Group sub-total 338,419 303,159 283,619 291,073 316,780 323,652 298,072
Volkswagen Group Volkswagen 111,296 84,923 87,376 79,683 86,590 97,128 92,285
Skoda 82,160 52,549 58,700 52,506 49,425 59,121 67,940
Audi 9,247 1,049 2,355 0 0 0 0
Volkswagen Group sub-total 202,703 138,521 148,431 132,189 136,015 156,249 160,225
Toyota Group Toyota 51,392 40,859 39,061 77,356 77,444 77,469 75,101
GAZ Group Gaz 67,212 54,187 54,681 57,739 63,746 69,700 70,834
Ford Group Ford 56,767 38,616 44,227 56,431 62,494 71,363 66,329
General Motors Group Chevrolet 123,385 43,646 32,104 32,177 31,739 43,983 53,263
Opel 28,447 1,733 0 0 0 0 0
Cadillac 817 331 0 0 0 0 0
General Motors Group sub-total 152,649 45,710 32,104 32,177 31,739 43,983 53,263
Other UAZ 50,302 57,169 49,931 40,567 33,727 33,974 37,247
Others 20,132 11,808 13,057 14,214 14,267 14,226 14,310
Luxgen 762 117 0 0 0 0 0
TaGAZ 58 570 0 0 0 0 0
Other sub-total 71,254 69,664 62,988 54,781 47,994 48,200 51,557
BMW Group BMW 24,843 16,422 18,224 23,870 31,294 40,034 44,810
Daimler Group Mercedes-Benz 6,782 5,517 6,098 6,297 7,868 13,632 34,763
Great Wall Motor Haval 17,090 0 0 0 11,561 24,031 26,471
PSA Group Citroen 7,127 2,722 1,938 2,335 7,405 11,372 14,478
Peugeot 5,369 2,252 1,792 1,532 6,074 8,626 10,198
PSA Group sub-total 12,496 4,974 3,730 3,867 13,479 19,998 24,676
Other Chinese Manufacturers Lifan 10,087 10,056 17,764 13,390 20,227 21,086 24,212
Hawtai 70 82 142 494 645 545 395
Other Chinese Manufacturers sub-total 10,157 10,138 17,906 13,884 20,872 21,631 24,607
Mazda Motors Mazda 30,846 23,214 24,110 17,496 24,747 25,673 23,306
Chery Group Chery 1,649 3,066 520 4,783 5,808 6,452 7,314
BAIC Group Foton 0 0 0 1,472 2,029 2,505 2,656
Brilliance Auto Brilliance 1,838 391 13 1,189 1,676 2,046 2,056
Changan Automobile Group Changan 0 0 56 778 1,198 1,461 1,501
Geely Group Volvo 0 0 8 0 0 0 0
Geely 10,697 871 0 0 0 0 0
Geely Group sub-total 10,697 871 8 0 0 0 0
FAW Group FAW 0 0 8 0 0 0 0
Mahindra Group Ssangyong 22,059 1,980 0 0 0 0 0
Jianghuai Automotive JAC 494 143 0 0 0 0 0
SAIC Group MG 8 28 0 0 0 0 0
Source: LMC Automotive "Global Automotive Production Forecast (February 2017)
(Note) 1. Data indicate figures of only small-size vehicles, including passenger cars and light commercial vehicles with a gross vehicle weight of under 6 tons.
2. All rights reserved. Reproduction of any data will require permission of LMC Automotive.
For more detailed information or inquiries about forecast data, please contact LMC Automotive.

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