Global Automakers Riding Out Storm in Russian Market

ST. PETERSBURG – Global automakers are absorbing losses in Russia’s steadily declining car market while expressing varying degrees of belief economic and political conditions will improve soon.

Amid continuing weakening of the ruble and sanctions stemming from support for pro-Russian rebels in Ukraine, vehicle sales were down 12.7% from January through October compared with a year earlier, WardsAuto data shows.

October sales fell 10.3% from like-2013 but rose 7% from the prior month, although the improvement was attributed in part to a government scrappage scheme designed to boost sales of domestically built vehicles.

Ford Europe President Stephen Odell cites “geopolitical issues and (the) economic situation” in predicting full-year Russian sales will drop to between 2.1 million and 2.3 million units, roughly 20% below prior-year.

Of the so-called BRIC group of large emerging markets, Odell says growth is taking place in China and India while Brazil is declining alongside Russia. Ford remains committed to Russia, however, with plans to be producing 11 models at three plants by the end of 2015, he says.

The automaker expects to achieve 60% localization of components by 2018, compared with the current 40%.

Carlos Ghosn, CEO of the Renault-Nissan Alliance, says the group will continue investing in Russia and launching new models.

Fiat Chrysler Automobiles CEO Sergio Marchionne predicts the Russian market will remain in recession for at least a year, after which the possibility of steady growth will emerge.

“I want to believe that common sense will prevail and Russia will (go) back to normal commercial relations with Western countries in 2015, because the alternative is poor not only for Europe, but for the whole world,” Marchionne is quoted in local media as saying.

Daimler CEO Dieter Zetsche adds it would be disappointing to see relations between Russia and the West deteriorate further. Sales of  Daimler’s Mercedes-Benz luxury brand, however, were up 18.6% through October compared with year-ago, Ward’s data shows.

At the same time, Carlos Tavares, President of PSA Peugeot Citroen, believes the Ukrainian crisis not only has hurt Russia’s economy but also has curtailed the purchasing power of  European Union consumers.

Within Russia, Tavares says, the weakened ruble forces automakers lacking fully localized production to raise prices, eroding consumer demand. He predicts the automaker will see more success in the coming year, noting a plan to cut costs at its Russian operation already has been developed.