BILBAO, Spain – Russia is ready for a sustainable rebound in new-car sales that will push volume to 3.2 million units by 2015, says the head of the country's largest importer and retailer of foreign-made cars.
There is also a huge growth opportunity for companies that offer auto financing as the country's car buyers switch to loans from cash to purchase their vehicles, Rolf Group CEO Nick Hawkins told the Automotive News Congress here this week.
Russia was on track to pass Germany as Europe's largest auto market before the global economic crisis hit, but the downturn caused the country's 2009 new-car sales to fall 49 percent to 1,465,917 units compared with 2008, according to the Association of European Businesses.
Hawkins believes 2009 was an exception and is confident of a rebound because he says: "Russians love to spend" and they are "really good at getting through crises."
Thanks largely to a government-subsidized scrapping program, which offers car buyers 50,000 rubles ($1,700) to trade-in old cars for new models that are built in Russia, the country's sales are improving. In May, the new-car volume rose 31 percent year-on-year to 157,937 units. Through five months, Russia's new-car sales were down 5 percent. After two months they were down 34 percent year on year.
The improvement has caused analysts to forecast an overall sales rise for 2010. In March, the AEB raised its forecast for full-year sales to 1.6 million cars and LCVs, up from a previously forecast of 1.5 million.
Of that total, the AEB predicts 1.45 million passenger cars will be sold, which is conservative compared with analyst Morgan Stanley's prediction that 1,824,000 cars will be sold in Russia this year.
Hawkins's prediction matches the AEB's.
"The potential in the market is so huge," he said, pointing out that the product that Russians most aspire to have is a car. "For them it represents freedom."
Big potential for car loans
Right now, 35 percent of car sales in Russia are financed – that is a big increase from about 10 percent a couple years ago, Hawkins said.
He predicts even great growth in the next two years.
"If the market remains stable, I would be astounded if it is not 50 percent or higher," he said.
Rolf, which sells cars for Mitsubishi, Hyundai, Mercedes-Benz, Audi and seven other brands at its 28 dealerships in Moscow and St. Petersburg, bought a stake in Capital Moscow Bank in 2008 so that it could offer its own car financing packages. That plan was stalled due to the crisis. Hawkins says Rolf is looking for a partner to help resurrect the project but gave no timetable for when the company would like to start offering car loans.
Despite that challenges of getting something started, Hawkins said that launching an auto financing business is Russia is “a fantastic business proposition," adding that "even the manufacturers will have to come in with captive financing."