car crisis

Moscow’s Faltering Auto Market

epa03373661 Models pose near a new Kalina model of Russian car maker Lada at the Moscow International Automobile Salon, in Moscow, Russia, 29 August 2012. The Moscow International Automobile Salon (MIAS) runs through to 09 September 2012. EPA/YURI KOCHETKOV +++(c) dpa - Bildfunk+++
A new Kalina model by Russian car maker Lada at the Moscow International Automobile Salon.
  • Why it matters

    Why it matters

    If economic and political crises continue, the dramatic fall in car sales will continue in Russia.

  • Facts

    Facts

    • The Moscow International Automobile Salon runs from August 24 to September 4.
    • In Russia, 3 million cars were sold in 2012 but in 2015 sales fell to 1.6 million due to economic and political crises.
    • The E.U. and U.S. are sanctioning Russia for annexing Crimea and supporting separatists in Ukraine.
  • Audio

    Audio

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The Moscow International Automobile Salon (MIAS) is usually a close-knit affair, but this showing is emptier than usual. Normally 12 exhibitors make their way to Russia, but this time only eight turned up, among them Daimler with Mercedes Benz. Presenting a wide range of products – including models like the GLC Coupé and the E-Class’ E43 AMG coming first to the Russian market – the auto maker easily steals the show. With a new production facility set to open in the country, it’s certainly seen as good publicity.

But only eight producers came to the MIAS, much to the disappointment of local press and public. It’s a reflection of the Russian auto industry’s deterioration, as plenty of manufacturers once keen to enter the market are now backpedaling.

China’s made itself at home at the auto show, with Changan, Dongfeng, FAW and Geely. Hyundai from South Korea and a somewhat surprising exhibitor, the Tehran budget brand Iran Khodro, round out the international displays.

Innovations are mostly from the domestic producer Avtovaz, owned by Renault-Nissan. Under its Lada brand, six concept cars are at the show, including the impressive crossover Lada XCode. But unfortunately it’s not for sale.

Back in 2008, the MIAS boasted world premieres, futuristic car concepts and massive visitor interest.

“There is no serial model for the XCode yet,” said chief designer Steve Mattin. “The concept car only demonstrates our vision for how Avtovaz will be developed.”

The Russian market is riding on the vehicle’s success, and otherwise could lead to an even deeper crisis. But previously, the industry looked promising.

“All foresight points to Russia becoming the strongest auto market in Europe no later than next year, with 3.45 million new car registrations,” said the president of the German Association of the Automotive Industry, Matthias Wissmann, in 2008.

Back then, the MIAS boasted world premieres, futuristic car concepts and massive visitor interest.

The oil price slump is what’s brought Russia into a lower gear. For decades, the country made do with domestic manufacturers Lada, Volga and Moskvitch. After the end of the Soviet Union, citizens eagerly bought used cars from the West as status symbols. Those who could would buy new. The MIAS had something for every taste and wallet, whether Skoda for bankers or bulletproof BMWs for oligarchs.

In that respect, Mr. Wissmann’s optimism and the entire German automobile industry – only in 2007, had Volkswagen agreed on a new plant in Kaluga – was ill-founded. Later the economic and politic crisis that started in 2013 would bring Russia’s auto market to a halt.

From what was once three million new vehicles, sales in 2015 have fallen to 1.6 million – and that’s not the end. According to the Association of European Businesses (AEB), 2016 is another 14.4 percent lower in the first seven months.

“The current situation is far from stabilizing to the modest level of last year,” said Jörg Schreiber, chairman of the AEB Automobile Manufacturers Committee.

Prospects appear to be good for the long-term, but what’s unclear is how long it will take until then.

 

André Ballin is a Moscow correspondent for Handelsblatt. To contact the author: ballin@handelsblatt.com

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