Back in the USSR: Russian car sales seen halving in 2020 due to coronavirus

Tough coronavirus-related measures coupled with the devaluation of the rouble and a big drop in personal incomes could see Russian car sales slump to levels seen around the fall of the Soviet Union in 1991, market participants and experts said.

FILE PHOTO: An employee works at a Renault cars sales and show room in Moscow, Russia. (REUTERS)
FILE PHOTO: An employee works at a Renault cars sales and show room in Moscow, Russia.

Russia, with more than 47,000 confirmed coronavirus cases so far, has imposed a partial lockdown and closed car dealerships in Moscow, where sales are highest, and in some other regions.

Also Read : Russia orders companies to cut oil output by 20% from February levels

The most popular cars are usually mass market models like Lada or Renault, though there is also demand for expensive cars from companies such as Daimler or BMW.

Sales data shows the rouble devaluation that resulted from collapsing oil prices encouraged Russians to rush to showrooms in the last week of March to buy cars before an expected price hike. But that was a one-off, experts said.

"Due to the rouble's weakening we can expect the market to shrink by 20%, but taking into account the lockdown, the fall may be 50%," Denis Petrunin, head of ASC Group, a big Russian car reseller, told Reuters.

That means the Russian car market, which once promised to be the largest in Europe with annual sales of almost 3 millions cars, is expected to fall to less than one million this year from 1.76 million in 2019, according to the Association of European Businesses.

Such low sales hark back to the Soviet era and to the post-Soviet 1990s, when most Russians were too poor to buy cars, data provided by Russian analytical agency Autostat shows.

Russia's car market was looking weak this year due to depressed incomes even before the oil price slump and the coronavirus lockdown.

Because most cars sold in Russia are imported or assembled from imported components, their prices, denominated in roubles, are set to rise.

"Now, everyone is staying at home and not getting paid. People who aren't sure about their future salary and whose businesses have closed are not considering buying a car," Autostat’s Executive Director Sergei Udalov said.

The proportion of cars bought on credit has increased in recent years and reached 50%. That could now fall three or four times, said Nikolai Gruzdev, head of Avtomir, one of the country's largest dealerships. A halving of the market was a realistic scenario, he added.

"Will people be willing to buy cars after the lockdown and at new prices? It is a big question!" said analyst Vladimir Bespalov of investment bank VTB Capital.

First Published Date: 21 Apr 2020, 09:30 AM IST
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