Russia: a bright spot for carmakers

For global automakers, the Russian car industry appears to be a bright spot - a very, very bright spot - against a dismal European auto market.

At the Moscow auto show, which kicked off on the outskirts of the Russian capital on Wednesday, brands like General Motors, Volkswagen and BMW were falling over themselves to emphasise the market’s importance to their brands, lay out expansion plans and praise the Russian car buyer.

GM said it would invest over $1bn in Russia over the next five years, after announcing in June that it would double production at its St Petersburg factory – one of three plants it operates in the country.

Meanwhile, Germany’s Volkswagen said it would invest $1.25bn by 2018, with part of the money going towards building an engine plant in Kaluga. And BMW said it too planned to ramp up its Russian production and expected to report record sales in Russia this year.

Ian Robertson, BMW’s head of sales and marketing, told beyondbrics the group’s Russia sales were up 30 per cent for the first seven months of this year and that the company expected to sell more than the record 28,000 vehicles it did last year.

The figures reflect what is expected to be a bumper year for the Russian market as a whole. While 2.5m cars were sold in Russia last year – a 40 per cent jump from 2010, this year an estimated 3m cars are expected to be sold.

Compare this to some of the other European markets. Sales for BMW in Germany have been flat, Robertson said, while in Spain the overall car market has fallen off a cliff. "The Spanish market is roughly half of what it was four years ago. 1.6-1.7m. This year it is maybe 700,000 – 750,000. It’s dropped by nearly a million cars,” he says.

While the situation looks considerably brighter in Russia, car companies are also having to follow new government initiatives that encourage automakers to produce more of their components here in Russia – a reason why companies like GM and Volkswagen are ramping up their local production facilities.

So what is the preferred carriage for your average, very wealthy Moscow driver? According to Robertson, many of BMW’s customers now prefer the larger sports utility vehicles.

"Four wheel drive is very appropriate for the weather conditions here. But also the elevated seating position is something I think the Russian customers really like,” he says.

Financial Times