Europe’s second largest auto market, once billed to overcome Germany for the top position, is deep entrenched today in a politically and economically driven slump.
Last year’s new car sales in Russia already showed signs of weakness, dropping 5% after years of double-digit growth. The situation was triggered by a general economy weakness, spurring consumer prudence, coupled with a deterioration of the local currency that made import purchases – including foreign auto models – a lot harder.
On top of that came the political tensions between Russia and the western nations (EU, US and Canda) over the formers’ implication in the Ukraine crisis. The outlook is even grimmer after last month’s attack on a passenger jet – with many implicating pro-Russia separatists.
The European Union, the US and Canada imposed sanctions over Russia’s banks and oil sector and the Moscow government is rumored to prepare its own retaliations, which would also affect the auto business.
That prepares the terrain for the automakers that have invested locally – such as the Renault Nissan alliance, Ford or Volkswagen. The one that could benefit the most is Renault, which together with its Japanese partner controls AvtoVAZ – the largest domestic carmaker.
“There’s no question Renault-Nissan did a good job getting ahead of most of the foreign industry on localisation,” said Ted Cannis, chief executive of Ford Sollers. “But we’re going to close the gap faster than they imagine,” he adds.
When it comes to locally sourced parts – an asset because of the decaying ruble – Renault is again on top. It’s rebadged Logan sedan and Sandero hatchback have a 75% localization rate, with the Renault Duster at 66% and Lada Largus at 62%. Volkswagen’s locally produced cars stand at around 50%, Ford’s joint venture is only at 30% and General Motors is losing the battle with just 20% ruble-billed content.