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Getting up to speed - Light vehicle market overview - EY - Global

Getting up to speed

Light vehicle market overview

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New light vehicle sales in Russia, thousands of units


New light vehicle sales in Russia, thousands of units

Source: AEB, ASM Holding, Avtostat

New light vehicle sales forecast, thousands of units


New light vehicle sales forecast, thousands of units

Source: Avtostat, AEB, JD Power, IHS Global Insight, EY estimates

The light vehicle market recovered to register a 30% increase in annual sales in 2010 with a volume of 1.9 million vehicles. This was after a considerable sales decline in 2009 and 1Q 2010. Growth was primarily driven by the sales volume in April-December 2010, which registered a 49.7% increase compared to April-December 2009.

However, this reversal was not anticipated by automakers, who had already developed a conservative outlook and therefore maintained low stocks in dealerships, resulting in supply falling short of demand.

The key drivers of the light vehicle market's revival were:

  • Government support initiatives (scrapping program)
  • Consumer confidence recovery
  • Growth in the car loan usage
  • State program for subsidizing locally manufactured passenger car logistics to the Far East, started in 2009.

New light vehicle sales in Russia,
thousands of units

Russian brands registered a 58% sales increase in 2010 compared to 2009 and amounted to 655,000 light vehicles. AvtoVAZ models took a 79% share of this segment. This spike in demand was almost entirely attributable to the car scrapping program.

Sales volume of Russian-made foreign brands also increased by 67% compared to 2009. Furthermore, imports of foreign models declined by 9% in 2010 primarily because of increase in import duties and plans of major car manufacturers to localize production in Russia.



Sales of top new foreign brands by volume*, units

Sales of top new foreign brands by volume*, units

Source: AEB * includes Russia-made foreign brands

Overall, the light vehicle market generated US$42b in 2010, an increase of 42% over 2009. While foreign brands (US$35.7b) accounted for more than 85% of this turnover, Russian brands contributed only 15% (US$6.3b).

Car market, US$ billion

Car market, US$ billion

Source: AEB, Price N, EY estimates

Market share by brand in terms of volume, %

Market share by brand in terms of volume, %

Source: AEB, EY estimates

Car manufacturers ramped up production in Russia as the local demand picked up significantly from 2Q 2010. Despite the scrapping program being designed to benefit local models, the growth in production of foreign brands in Russia in 2010 was higher compared to that of local brands: 123% and 83%, respectively. In volume terms, foreign brands produced 627,076 cars in 2010, compared to 581,041 units by the local brands.

Car sales per segment, thousands of US$

Foreign brands

Car sales per segment, thousands of US$

Russian brands

Car sales per segment, thousands of US$

Source: AEB, Price N, EY estimates

Passenger car production breakdown by volume, %

Passenger car production breakdown by volume, %

Source: ASM Holding, EY estimates

Light vehicle market drivers

What are the short term market drivers?

  • Government support initiatives including car scrapping program. Planned budget allocations in 2011 amount to RUB5 billion (100,000 certificates)
  • State program of subsidizing car lending. Planned budget allocations in 2011 total RUB1.75 billion
  • Further slow imports substitution by local production due to the increased import duties

What are the mid- and long-term market drivers?

New light vehicle sales forecast,
thousands of units

New light vehicle sales forecast, thousands of units

  • "Pent up" demand for cars
  • Aging car fleet and relatively low car density as compared to developed automotive markets
  • Plans of major automotive manufacturers to increase production volumes and localization ratios in order to comply with requirements of Industrial Assembly
  • Planned state allocations to preferential car lending budgeted at the level of RUB1 billion (in 2012) and RUB0.5 billion (in 2013)
  • Selection of long-term strategy of partnership with foreign producers of passenger cars (within Russian automotive industry strategy 2020), which implies no further increase of import duties EY forecast for the light vehicle market. We have compiled a forecast for the light vehicle market for 2010-12, based on materials and estimates of leading automotive analytical agencies and our market understanding.


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