Global automakers are once again nervously monitoring the health of Russia's car market as a sales slide threatens billions of euros committed to increase manufacturing capacity in the country.
Russia recovered quickly from a 2009 crash that halved auto sales to about 1.5 million. Last year, registrations rose to more than 2.9 million vehicles. In the first six months, however, sales are down 6 percent, causing John Stech, president of Volvo Russia, to make comparisons with 2009.
"Similar indications are also here. The ruble is getting weak and car loan interest rates are going up. It creates anxiety among Russian buyers," Stech told Automotive News Europe in an e-mail.
A prolonged downturn would financially hurt all the big global automakers, especially those that have spent the past few years expanding their local production capacity.
$10 billion investments
Ford, General Motors, BMW, Hyundai-Kia, Mazda, PSA/Peugeot-Citroen, Mitsubishi, Renault-Nissan, Toyota and Volkswagen Group all have announced new or expanded capacity with a total of $10 billion (7.6 billion euros) committed to manufacturing by 2020, according to analysts at Boston Consulting Group.
Boston Consulting estimates that capacity in the country will grow to 3.3 million by 2016 from 2.3 million last year.
LMC Automotive analyst Carol Thomas said: "There is a lot more capacity going in than demand."
However, the capacity "will get used up pretty quick" if the market resumes its previous growth and if there is global economic stability, Ted Cannis, CEO of Ford Sollers, Ford's Russian joint venture, told Automotive News Europe.