London, England – Despite the economic recession, the Russian automobile industry will be stable and lucrative again, according to a report by Frost & Sullivan, which also predicted that by 2012, Russia’s car market will be the world’s third-largest behind the U.S. and China.
Recent analysis from October to November 2008 showed a 19.3 per cent drop in sales of new foreign passenger cars, but in response, the government is rethinking its lending policies, automobile import policies and import tariffs, while major Russian manufacturers are restructuring the number of weekly work days and reducing its workforce.
“As soon as the Russian banking sector overcomes months of financial turmoil, and automotive loans are available again for Russians, then sales of passenger cars are expected to revive their growth, however, most likely at a slower pace,” said Andriy Ivchenko, industry analyst at Frost & Sullivan.
Frost & Sullivan reported that more than 45 per cent of passenger car sales in Russia were financed through bank loans, and the financial crisis in the country forced the banks to almost put a hold on new automotive loan applications. The slump in demand caused many auto manufacturers, including GAZ, AVTOVAZ and KAMAZ, to reduce production. Foreign manufacturers such as Renault, Ford and General Motors are amending their production plans for January 2009 in Russia and delaying production of new models.
The government has changed importation policies, with imports restricted to cars older than five years; currently, the system allows cars no older than seven years. Import tariffs have also been increased, with the government hopeful that this will reduce the volume of import and gradually accelerate the development of foreign assembly in Russia.