OREANDA-NEWS. July 29, 2010. PricewaterhouseCoopers (PwC) presented a review – "Prospects for the Russian automotive market". Recent months' performance may indicate that after a year of stagnation, the market is beginning to recover both in quantitative and monetary terms, largely thanks to government support. In June 2010, the biggest sales volume since January 2009 was registered. There was an increase of 45% in unit terms against June 2009, reported the press-centre of PwC.

Import substitution, because of a weak rouble and high customs duties, and state programmes aimed at encouraging sales of cars produced in Russia continue to increase the share of domestic production in the market. The share of locally assembled cars as a percentage of total sales had been decreasing for several years in a row up to 2008. Since then it has increased significantly and by June 2010 and reached its highest level in the last eight years. The share of foreign cars manufactured in Russia, which has been growing constantly since 2002, exceeded in the first half of 2010 30% in unit terms and 33% in money terms. We believe that this trend will continue in the medium term.

The purchasing power of the well-to-do recovers more quickly and, as a consequence, premium brand sales are growing faster than the market overall. At the same time Budget car market also showed an increase due to the government support rendered to the sector.  Difficult situation is observed in the middle segment: the performance of most (excluding Korean brands and brands produced locally) is currently worse than the market overall.

PwC continues to believe that it is too early to say that the market is recovering significantly. An increase in sales and production of traditional Russian brands was primarily triggered by the government scrappage scheme. Growth in the segment of foreign brands produced in Russia is mostly due to the import substitution effect. The cheapest segment of the market and the most expensive segment are both growing, however it continues to be a decline in the middle segment. With current macroeconomic trends set to continue, we believe that the sales result in 2010 will be close to our optimistic forecast made at the beginning of the year, reaching about 1.6m cars mainly due to successful implementation of state incentives. In general, car scrappage and interest rate subsidy schemes are being successfully implemented. However, their extension and additional modification must be considered in order for them to have not only short-term, but also long-term strategic effect for the industry’s development.