The former communist country is seen by the major carmakers, such as General Motors, Ford, Volkswagen, Renault-Nissan, etc., as an emerging market that could have a key strategic position.

The only problem for them – which all invested heavily in developing local production to cater for what was just two years ago very healthy demand growth – is that today’s political tension fuels the already dwindling demand triggered by an economy slowdown.

Russia, Europe’s second largest auto market, has been in fumes over the Ukraine political crisis, made worse by the recent downing of a Malaysian airliner. All carmakers now fear the onset of an even more pronounced slump in demand in the second half of the year.

“Russia is potentially the largest market in Europe,” said Bob Shanks, Ford’s CFO.

Volkswagen CEO Martin Winterkorn said last year that Russia is its “No. 1 strategic growth market in Europe.”

AEB, the auto industry body in Russia, has revised its full year prediction for 2014 to a 12% decline in new car sales, reaching just 2.45 million vehicles. At the start of the year, the association only forecasted a 2% slump. The difference underlines the rapid decay the auto market has seen in recent months, a dip that could jeopardize future foreign brand investments in the country.

Via Automotive News Europe


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