PARIS (Bloomberg) -- Renault-Nissan CEO Carlos Ghosn said Russia's car market will probably shrink by another fifth this year, putting pressure on the alliance he leads after it teamed up with AvtoVAZ to strengthen its leading position in the country.
This "is one-third of the Russian market disappearing in a couple of years," Ghosn said in an interview with Bloomberg Television Monday in the Paris suburb Saint-Denis. "It’s already pretty bad. With the forecast we have in 2015, we should be at the end of the tunnel, but we never know."
Sales of new passenger cars and light commercial vehicles fell 10 percent in 2014 to about 2.5 million units, according to the Moscow-based Association of European Businesses, or AEB.
Combined sales by Renault, Nissan and AvtoVAZ - Russia's largest automaker - dropped 7 percent last year to 764,245 vehicles. The partners’ market share widened to 30.7 percent from 29.6 percent in 2013.
AEB sees Russia’s auto market plummeting by a further 24 percent in 2015.
"The combination of falling sales and currency is very problematic," Arndt Ellinghorst, a London-based analyst Evercore ISI, said today. "It doesn’t endanger the group at all, as the market isn’t big enough, but it is a painful delta. We already heard from Ford and GM that Russia is a problem. It was the key reason why Ford was disappointing in Europe again."
Renault and Nissan indirectly own 50.01 percent of Lada-maker AvtoVAZ, a key element in a plan to gain at least 40 percent of the Russian car market by 2016.
The alliance has invested in manufacturing plants and developed a network of local suppliers to be less vulnerable to foreign-exchange fluctuations. Still, the deepening of Russia’s economic recession would represent a blow.
“For the time being, you can’t just move in and out of markets,” Ellinghorst said. “You just have to manage the downturn, limit the damage, keep the relationships you’ve established and wait for the country to recover.”