Russia: crisis to drive out local brands?
Russiais already a country with problems piled up under the problems, but the auto sector of the country seems on the verge of a real catastrophe. The Ministry of Industry expects a decline in sales during 2015 of around 25 percent. The measures taken by the government to stimulate car sales have clearly failed. In the first 3 months of this year, sales of new cars were 42.5 percent lower than in the same period of 2014. The consequences of the free fall in car sales could be disastrous. Russia has invested a lot of money in the creation of hits own auto industry. Some 20 billion Rubles invested since 2010 seem to have be gone up in smoke.
China keeps investing in Russia
The biggest danger the Russian car companies still are confronted with is of course China, a country that has the financial power to keep investing in the Russian auto market. If things remain as bad they are now, most Russian auto brands seem doomed to disappear. Cheap Chinese cars are rapidly conquering the Russian market. The problems are deep rooted: obsolete technology, cars of low quality and prices that are too high to win the in the competition with the Chinese counterparts. Whether the Russians want to hear it or not, Chinese cars are simply better, despite the fact that the government in Moscow continues to believe in a great future for the Russian car industry.
What to do?
An additional problem is the rapid decline of the Ruble over recent months, even though the Russian currency was on the mend in the third week of April. The foreign auto companies are not sure what to do in the current market circumstances. General Motors announced in the March that it will leave the Russian market and end production in the country. Only a few years ago the management of GM was enthusiastic, proclaiming Russia would be one of the fastest growing car markets in the world. And only a few days ago Ford came along with positive news. This American auto company is ready to invest more in the Russian market and will take full control of the joint venture with Russian car maker Sollers. Ford still believes that the problems on the Russian market will be temporary and that there is still a bright future for the auto industry in the country. It is as yet unclear who has made the right decision: General Motors or Ford. Only the future will tell… | 21/04/2015 | Jos Sterk