Weak rouble hitting carmakers
Big moves in the foreign exchange markets are no longer exceptional. The Brazilian Minister of finance Guido Mantegua already warned back in 2010 of the risks linked to the so called currency wars. Several central banks in the world are trying to make their currency as cheap as possible, hoping to stimulate exports by using this weapon. In recent days the values of the Turkish Lira, the Indonesian Rupiah and the Malaysian Ringgit have fallen sharply. But other currencies have also lost ground, especially against the Euro and the Dollar. The Japanese Yen is an example of a currency that has artificial been made cheaper by interventions from the Bank of Japan, in the hope of improving the country’s economy. Recently published economic figures, however, show that this remedy was not very successful. But besides the yen there is another important currency that has recently sharply fallen in value.
Rouble halved in value in a few years
The Russian rouble has halved in value in only a few years. One of the causes of the weak rouble is of course the Western sanctions that have caused heavy damage to the Russian economy. In addition, oil prices fell sharply. Russia is a major exporter of this energy source. Less income from the sale of oil has caused lots of pain to the Russian treasury. Most industries also feel the pain of the weak rouble, but in the automotive sector in particular, the damage done is great. The weak rouble is more and more becoming a heavy burden for the Russian automakers.
Parts from abroad are becoming expensive
Russian car makers have to pay for parts bought outside the country in dollars, so those parts are becoming more and more expensive because of the weak rouble. The manufacturers have been forced to increase their prices, because of course they can’t sell their cars at a loss. Due to the higher prices however, the Russian car companies no longer succeed in selling their vehicles elsewhere in the world. The sector has a period of strong growth behind it, but that period is now in the past. Since early July the exchange rate of the rouble has dropped by another 15% against the dollar and that means the automakers will have to go through a difficult and dark period. | 25/08/2015 | Tim Harrup