OREANDA-NEWS. May 18, 2010. Key Russian car producers AvtoVAZ, KAMAZ, GAZ and Sollers received letters from metal suppliers warning of 10-30% hikes in metal prices in July, according to Reuters. AvtoVAZ has reported that automobile prices will rise by 2% from 15 May as a result of rising costs for materials and components, reported the press-centre of OTKRITIE Financial Corporation.

View: The metal cost for automobiles is more than 20%, and we anticipate that car prices will rise by 2-7% in the near future. The increase of the price of components may negatively affect the value of car sales and undercut demand for key Russian car producers. Increasing prices for cars, the termination of the government’s recycling program, and the traditional consumer summer slowdown will likely combine to have a negative impact on domestic car sales.

Valuation and Action: We view the news as negative for companies in the domestic car sector. Our valuation models and recommendations for domestic car producers are currently under revision.