Russian Car Market Plummets as the Economy Braces for a Recession
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The Ukrainian crisis continues to cause headaches for Russia’s economy, including the Russian automotive sector. With the U.S. and Europe enforcing severe sanctions over exports to Russia, car sales plummeted to a record low.
The Ukrainian crisis continues to cause headaches for Russia’s economy, including the Russian automotive sector. With the U.S. and Europe enforcing severe sanctions over exports to Russia, car sales plummeted to a record low.
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The current Russian car market
Sources confirm that the sales were down by 35% as compared to last year. The collapsing ruble has also made it harder for domestic producers to make affordable cars. A decline of 25% puts the Russian car market estimate at 1.52 million cars for this year, considerably less than most European counterparts. Moreover, the penalties imposed on Russia by the Western powers have blocked Russian industrialists from borrowing from the international market, which has created an obstacle for regular production.
The end of last year, though promising for many market participants as the producers sought to delay the price increase to bolster car sales, has turned out to be a true nightmare for the car market.
Records show that the overall sales volume in January saw a 24% decline compared to last year, with the sale of only 115,390 cars and light commercial vehicles. Experts predict that the figures will continue to dwindle this year. Predictions are that the situation may not rebound until 2019 or 2020.
Ruble Rubble
Russia’s currency, losing 47% of its value, is by far the worst performing major currency. Reduced oil exports and economic sanctions prevent the international exchange of the currency, further causing the decline of its value. Though the Central Bank has tried to prevent the downfall by changing the key interest rate six times in the last year, it has proved largely ineffective since the level is still too high for the economy to sustain.
Rising import prices and inflation have lowered consumer spending, forcing Russia to face another economic downturn after just beginning to recover from the Great Recession.
The Forecast
The shrinking Russian car market has been happening for the last two years with the present Ukraine situation simply accelerating the decline. Statisticians predicted two years ago that the car market could turn around by 2017, but the collapsing ruble and the current geopolitical situation pushed the date out. It is worthy to note that predictions were that the Russian car market would surpass German and other major European car markets in the same period.
