Renault-Nissan-AvtoVAZ expected to resist weakening ruble in Russia

Article by Christian A., on March 26, 2014

Analysts believe that Renault-Nissan-AvtoVAZ will be able to withstand the effects of a weakening ruble resulting from the Russia's dispute with Ukraine. A weakening ruble along with a lingering undersupply of locally made parts could affect revenues of foreign carmakers in Russia, as imported parts could become more costly.

The Renault-Nissan alliance, which holds a majority stake in AvtoVAZ, boasts of components localization nearing 100 percent. "Renault may even benefit from price increases forced on less localized peers," Barclays wrote in a report last week. "Renault benefits from a very high level of local sourcing in Russia so that we are fairly protected from the devaluation of the ruble," a company spokeswoman told Automotive News Europe.

The weakening ruble as well as quavering consumer sentiment is already affecting the 2.8 million-unit Russian car market this year even if new sanctions imposed on the country don’t arrive. IHS Automotive is now expects the Russian vehicle market to drop 7 percent this year, from a 3-percent fall forecasted earlier this year before the Ukraine crisis escalated, remarked Carlos Da Silva, IHS’s manager for light vehicle forecasts in Europe.

Auto sales in 2013 dropped 5.5 percent. Da Silva expects the current dispute to affect 2015 and 2016, adding that a worst-case scenario of full sanctions could lead to a further downgrade. "The most vulnerable automakers are the ones importing the most,” said Da Silva. "Any carmaker that is not producing locally will be impacted." Renault-Nissan-AvtoVAZ had a 32-percent share of the Russia market in the first two months of 2014. It is followed by Volkwagen Group with 11 percent and GM with 9 percent, according to data from the Association of Business in Russia.

In 2013, Renault and Nissan posted a combined 2-percent surge in global vehicle sales to 8.27 million units, which is a new record for the carmakers. Renault-Nissan’s global deliveries include sales of AvtoVAZ, which sold 534,911 vehicles globally. However, global sales of AvtoVAZ in the year dropped 12 percent.

Earlier this year, AvtoVAZ disclosed plans to slash its workforce by 11 percent, or around 7,500 jobs, as it tries to remaining profitable in a slumping Russian economy. AvtoVAZ chief executive Bo Andersson, said in a statement that the carmaker has developed "urgent measures" to revise production, slash costs as well as tighten control over inventory and working capital.

Andersson was appointed as CEO of AvtoVAZ on Dec 31, 2013, with a mission to achieve a sales target set by Renault-Nissan CEO Carlos Ghosn of a 40-percent combined market share for the three carmakers by 2016. [source: automotive news - sub. required]

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