Carmakers still believe in long-term viability of Russian market

Article by Andrew Christian, on December 23, 2014

Carmakers remain confident of their business in Russia in the long term, despite a deteriorating economy that has led them to incur heavy losses. With a weakening local currency and lethargic vehicle sales, carmakers have no choice but post losses. "It's a bloodbath for everybody,” Renault-Nissan chief executive Carlos Ghosn was cited by Reuters as saying.

Some carmakers like General Motors, Audi, Renault-Nissan and Jaguar Land Rover decided to suspend to limit sales a time this month to offset losses brought by the depreciating ruble, which value has dropped over 40 percent against the dollar since Jan. 1.

Other carmakers like Ford and BMW hiked prices of their offerings as they bid to make up for surging losses. Ford has seen its sales dip 40 percent in the first 11 months of 2014 to 56,807 vehicles, as demand for the Ford Focus continues to drop.

On the other hand, GM’s Chevrolet and Opel brands logged a combined 26-percent drop in the period to 169,005 vehicles. Carmakers’ optimism with Russia is not unfounded. Annual auto sales in the country jumped to 2.9 million units 2012, allowing it become the second largest in Europe next to Germany.

Attracted with such demand prospect as well as the promise of favorable taxes, a number of carmakers like Ford, GM, Volkswagen, Nissan, Toyota, Hyundai and Kia invested to have production operations in Russia.

But for now, carmakers are bleeding, with sales of cars and light-commercial vehicles dropping 12 percent in the January-November to 2.2 million, according to data from the Association of European Businesses.

That means Russia slid from being the No. 2 market in Europe to No. 3, being overtaken by the United Kingdom in European sales. Carmakers are expected to post sales as low as 1.5 million vehicles next year.

Topics: russia

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