Russia's new-car market, helped by additions to the government's fund for trade-in incentives, finished 2010 on track to revisit pre-crisis sales levels over the next two years.
Sales of new cars and light commercial vehicles are expected to rise another 17 percent this year to about 2.24 million units after gaining 30 percent to 1.91 million units in 2010, according to the Association of European Businesses, which compiles the Russian sales data.
Sales will likely jump another 23 percent in 2012 to about 2.9 million units, the Moscow-based trade group said. That level would come close to matching sales in 2008, before demand was halved in 2009, and help Russia challenge Germany for the title of European car-sales leader.
Russia was on track to challenge Germany's automotive sales lead before the global economic crisis hit in 2009, the AEB said.
“We could see a 2.9 million market this year, although that possibly is a stretch,” said David Thomas, chairman of the AEB's autos committee and head of Volvo Cars Russia. “But in 2012, we will get back to the 2.8 million to 2.9 million level.”
Under a government program launched last March, owners can receive 50,000 rubles or about $1,673 to swap cars that are at least 10 years old for new models built in Russia. The fund was enriched last summer and autumn to a total of 34 billion rubles (about $1.15 billion), indicating enough support to generate some 690,000 sales.
Although the program has lifted all brands, imports and domestic makers alike, Russia's AvtoVaz had the most new sales in 2010. The automaker, which is 25 percent owned by France's Renault, said sales of its iconic Lada brand soared 48 percent over 2009 to 517,247 cars and LCVs.
“It's worth noting that more than 80 percent of sales generated by the scrappage program have gone to the lower-priced domestic brands,” said Mark Ovendon, Ford's chief in Russia and vice chairman of the AEB committee.
Lada's market dominance remained unchallenged by any other brand in 2010, according to the AEB.
The No. 2 brand, Chevrolet, finished the year some 401,000 units behind the Russian automaker despite being up 11 percent, while No. 3 Kia trailed by nearly 413,000 units, according to the AEB. Ford finished the year 427,000 units behind Lada, although its Focus reclaimed the mantle of top-selling non-Russian model in 2010.
With a gain of 167,657 units over 2009, Lada also captured 38 percent of the market's total increase in unit sales in 2010. With the gain, Lada's market share widened to 27 percent from 23.8 percent at the end of 2009.
Luxury brands also posted solid growth in 2010 year despite some having to overcome Russia's 25 percent tariff on non-Russian-built vehicles.
Sales for Mercedes-Benz, which rose 63 percent over 2009 to 21,848 cars and vans, virtually tied BMW's total of 21,335, up 25 percent. The BMW total includes 751 Minis. The two German brands remain the favorites of Russia's business and government elites.
Audi sales rose 23 percent to 18,510 in 2010. Local production of the Volkswagen AG premium brand at VW's Kaluga plant ended late in the year, and all future sales will be imports with an undetermined effect on volume.
Among other luxury brands, Lexus was up 72 percent to just under 11,000, Infiniti was unchanged at under 4,700 and Cadillac, Hummer and Jaguar slipped.
Warren Browne, whose namesake consulting firm in suburban Detroit tracks global auto markets, said he gives Russian leaders credit for taking action in the face of the global crisis.
“It's safe to say that the scrappage program generated as many as 300,000 sales in 2010,” he said. “Their goal was to save their domestics, and they have, even if they helped others along the way.”
But even with those numbers, he said, Kremlin policymakers had to be “disappointed” with 2010.
“They know 1.9 million is a pretty poor performance,” he said. “Russia should be a 3-million-unit market and they want to get there quicker than this.”
Browne, a former head of General Motors' operations in Russia and the former CIS, said he agrees with the AEB's general outlook for 2011-- assuming the scrappage incentives remain in place and the ruble stays strong. But he doesn't foresee Russia overtaking Germany anytime soon.
“I look for the Kremlin to end incentives when sales get back around 2.5 million,” he said. “Germany is a proven, bonafide market of 3 million-3.1 million without incentives, so Russia has a ways to go to beat that.”