Russia sees car market decline image

A year of disappointing auto sales in Russia has dealers and carmakers worried that a once-red hot market that was set to become Europe’s largest may have slipped out of gear.

Stuttering economic growth, unhelpful demographic trends and a coming increase in car capacity could dampen one of the few bright spots in a global market that is under pressure.

After three years of double-digit growth as Russia recovered from the 2008-2009 economic crisis, sales so far this year are down around 6 % according to the Association of European Businesses, a Moscow-based lobby group that counts major auto makers among its members.

Auto executives, resolutely bullish that Russia’s rising middle class will support sales long-term, do not predict another crisis, but are worried about an extended contraction. The stakes are high for automakers, which are investing billions into Russia and striking alliances with local players.

An economic slowdown has been compounded by the effects of a slide in the birth rate that followed the disintegration of the Soviet Union in 1991. As a result, fewer people are reaching the age at which they would buy their first car.

A fall in 2009 car sales during the crisis means there are now fewer drivers eager to replace 3-4 year-old cars. And dealers overstocked in 2012, analysts said, leading buyers to hold off this year in the hope of snapping up a bargain.

Although the AEB lobby group expects sales to steady in 2014 it is concerned the slide may continue. Market analyst firm Autostat predicts a 5 % fall in 2013 and sees a long-term stagnation ahead.

Via Yahoo Finance