Russia auto sales decline slowed by Weak ruble, scrappage scheme

Russia auto sales decline slowed by Weak ruble, scrappage scheme

A slump in the Russian ruble and a state scheme to support local car sales slowed falls in vehicle sales in October to 10 percent year-on-year from 20 percent a month earlier, the Moscow-based Association of European Businesses said.

The AEB said sales of new cars and light commercial vehicles reached 211,365 in October as people delayed large purchases because of a weaker economy dragged lower by Western sanctions over Ukraine.

“Market performance in October was anything but great, however [it is] a step forward compared to the very weak results in recent months,” Joerg Schreiber, AEB committee chairman, said in a statement.

“The reason behind the relative improvement is the combined effect of the scrappage incentive supporting the sales of domestic models, and the sharp decline of the ruble,” Schreiber added.

Car sales have become one of the biggest losers in an economic downturn in Russia, worsened by sanctions and a drop in the oil price.

The Russian ruble has fallen almost 30 percent against the dollar since the start of the year.

To try to curtail the slide and boost domestic industry, the government introduced a scheme under which the state provides cash incentives for Russians to buy new cars if they sell old ones for scrap.

Under the terms of the scheme, buyers of new passenger cars are eligible for a discount of at least 40,000 rubles (€752) when scrapping or trading in their old vehicles.

AEB said the impact of the two factors would be temporary, but for now could drive a further improvement in the market sales statistics for November. In the first ten months, new-car and LCV sales were down 13 percent at 1.99 million.

The AEB has said it expects full-year volume to be down 12 percent in 2014 to 2.45 million as the scheme helps slow down the rate of decline.

Most major automakers experienced smaller sales drops last month.

AvtoVAZ-Renault-Nissan, Russia’s biggest auto group, saw flat sales, with a drop of just 0.1 percent in October. Sales at Volkswagen Group, the No. 2 auto group, were down 16 percent last month.

Sales of third-placed Kia fell 1 percent, while Hyundai, the fourth best-selling automaker in Russia sold 3 percent fewer cars. Sales of No. 5 Toyota dropped 3 percent.

Both General Motors and Ford were badly hit with sales plummeting 34 percent at both automakers. Conversely, Mercedes-Benz Cars bucked the trend with its sales rising 17 percent.