IHS Automotive perspective:

The Russian light-vehicle market has posted its most accelerated decline since the dark days of 2009 with a 42.5% y/y fall in sales to 139,850 units, according to the latest date for the Association of European Businesses (ABE) which collates light-vehicle sales statistics in the market. This left the year-to-date (YTD) sales down by 36.3% y/y for the first quarter of the year with a figure for the period of 383,691 units. These figures show the full impact of the economic chaos that is currently engulfing Russia on the country's vehicle market, from a sales, retails and production perspective.

AvtoVAZ's Lada brand actually fared better than the overall market in March which has widely been the trend in recent months as a result of its cars having a higher percentage of scrappage scheme aided purchases than foreign OEMs, and their lower price point meaning they benefit more as a percentage from the scheme. The company's sales fell by 26% in March, which was significantly below the overall market fall, to 27,423 units. YTD sales were down by 25% y/y in comparison to the overall dip of 36.3% during the quarter. Lada's March results were helped by the very strong performance of the best-selling Granta, which benefited from a very high percentage of scrappage sales. In March sales of the Granta dipped by 520 units to 12,458 units, while YTD sales fell from 32,493 units to 30,710 units.

Second-placed brand Hyundai also bucked the wider trend with a markedly smaller, but still significant, 15% y/y fall to 13,901 units. In the first two months of the year Hyundai had done well, thanks to continuing good sales of the Solaris and other models, to keep the decline during the first quarter to 4% y/y to 41,307 units.

However, Kia had a much tougher time in March despite retaining third place in the overall brand sales chart, with sales falling 32% y/y during the month to 12,121 units. The brand's best-selling Rio suffered a big y/y fall during March with volumes falling to 7,176 units during the month down from 9,728 units in March last year. This dragged the decline in sales for the first three months of the year to 36,030 units to 15% y/y for Kia.

The biggest faller in sales percentage terms of the top 10 brand in March was VW which was down 57% y/y during the month to 6,150 units, dragging overall volumes down by 47% y/y to 18,119 units. The company recently announced production stoppages at its plant in Kaluga.

However, Daimler's Mercedes-Benz brand maintained its very strong recent performance with sale falling by just 3% y/y to 4,015 units, with the brand maintaining growth of 9% y/y to 11,341 units for the third quarter, largely thanks to the strong start in the market of the GLA-Class which was only being launched at this point last year, and the new C-Class.

Outlook and implications:

The Russian light-vehicle market is currently undergoing something of an existential crisis as a unique combination of macroeconomic and political circumstances are completely undermining any possibility of positive sales growth in the market. The weak rouble continues to push up the price of imported completely built-up units (CBU), and imported components. There was also a comparatively high base comparisons with March 2014 which also contributed to the accelerated decline. There was also a move to clear dealer stocks of 2014 model year cars in January and February which also ensured that the relative performance during those months was marginally better, while consumer confidence has fallen through the floor as a result of the continuing macroeconomic chaos.

Russia's national statistics agency RosStat has released its consumer confidence survey for the first quarter of 2015. The consumer confidence index has fallen by 14 percentage points compared with the previous quarter to -32%. This is the lowest figure since the first quarter of 2009.

IHS Automotive's Russian market analyst for automotive forecasting Svyatoslav Kuchko said, "Some customers have probably been waiting for the loan subsidy program, which started on April 1st". Kuchko believes that the March decline represents the market's nadir in terms of 2015's overall performance. He said, "I think that this March the market has already reached the bottom in terms of year-on-year decline. In the coming months the market will continue to fall but not at such an accelerated rate. Firstly, the comparison base will be lower (in April 2014 a noticeable market decline in Russia began). Secondly, the loan subsidy program is expected to support the demand. Besides the inflation, which was galloping in the beginning of the year, is slowing down and the ruble exchange rate is currently improving. On April 30th the board of the Central Bank of Russia is expected to discuss the base rate. If it decides to lower it, this (together the loan subsidy program), would make credit buying (which made up 35% of the total market in 2014) a bit more affordable again."

But there is still much pessimism regarding the medium- and long-term prospects for the Russian market, highlighted by General Motors' (GM) decision to withdraw from the market as a full-range, volume manufacturer at the end of the year, despite being one of the market leaders until a few years ago.

For the full year IHS Automotive's light-vehicle forecast still stands at 1.81 million units, a decline of 27.4% % y/y.