Russia Automotive Trends
Maria Yagoda, Technical Account Manager, Infineum
Infineum explores the key factors driving the development of Russia’s passenger car and heavy-duty vehicle markets and highlights the impact these trends have on lubricant and base stock demand and quality.
The fortunes of the Russian economy generally follow oil prices. In recent years, the drop in Brent Crude, combined with the impact of sanctions, has been reflected in a slowdown in the country’s gross domestic product (GDP). However, as the oil market picks up, the GDP growth rate is likely to return to positive numbers in 2017.
In September, The Ministry of Economic Development of the Russian Federation said growth could reach 2.1% this year, much higher than previously forecast. It also said that in the next three years it expects sustainable growth of the national economy of at least 2%, a stable inflation rate at 4% and household income recovery.
This news should help to improve consumer confidence although, in a weakening Rouble currency, the government has introduced a number of industry support programmes, with a total fund of 62.3 billion Roubles, to help improve auto sales. These initiatives will be well received by automotive OEMs keen to tap into Europe’s fifth largest consumer market.
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The number of vehicles on Russia’s roads is also growing, albeit slowly, with the size of the passenger car, heavy-duty, light commercial and bus fleets all up. Most growth was seen in the passenger car segment, which grew 1.7% compared with 2015.
Something to watch here is the expected sales increase of Korean brands in the next five years.
New car registrations tend to mirror the economic situation and in the past four years there has been a decline in sales – with owners keeping their vehicles for longer. A number of factors including higher crude oil prices, improved customer confidence, a better economic situation and a stronger Rouble could change this picture in 2017.
Chart 1. Russia vehicle fleet 49.7 million in 2016 Passenger cars
In the passenger car market, half of the 41.6 million vehicles on Russia’s roads are over 10 years old and 89% run on gasoline. Stable growth of the passenger car fleet in recent years means we can be fairly confident in forecasting further positive growth over the next five years. However, the erosion of domestic brand market share is also expected to continue, with foreign brands likely to account for 66% by 2021.
LUBE MAGAZINE NO.142 DECEMBER 2017
Not surprisingly, given lower sales, Russia produced fewer cars. 2016 production was generally down for both domestic and foreign manufacturers on 2015, although some production growth was seen at VW, Ford, Toyota and LADA Izhevsk. AUTOVAZ remains the largest producer, manufacturing cars under its Lada and Renault-Nissan alliance brands. Today, foreign brands account for 77% of all Russian production. In the next few years, new assembly plants at Mercedes Benz, Lifan and Great Wall mean annual production capacities could increase to 3.3 million units – although only 50% utilisation rates are expected.
Exports of cars produced in Russia have been in decline for the past four years and 2016 was no exception, with figures of 68,000 down 30.2% on the previous year.
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