Car market trends: ‘Dealers have been warned there won’t be enough cars’

Experts promise a new deficit of cars and, as a consequence, a rise in prices

The growth of car sales in Russia in four months of 2021 is measured in tens of per cents and hundreds in some brands. However, it isn’t as glittering as it seems at first sight. Dealers still feel a deficit of cars, while good numbers are a result of resumed supplied because of the collapse during the pandemic last year. Read about this and prospects of the car market in Realnoe Vremya’s review.

Sales soared but didn’t reach the level of 2019

Car and light commercial vehicle sales have risen by 290% in Russia in April 2021 (compared to last April), to 151,964 cars. Over the month (April 2021), the growth totalled 2,2%. During four months of 2021, the Russian car market has sold 515,934 cars (+24%), says the Association of European Businesses. Percentages this year are high because of the low base last year, during the lockdown.

In fact, as Yevgeny Moskov, editor-in-chief of AvtoBusinessReview magazine, noted, there still a deficit of cars in some places. Everything strongly depends on the brand, production localisation, everywhere the situation is different.

“There has been a problem with demand. Sales have fallen by 5% from January to April if we compare it with the analogous period in 2019. While April alone exceeded just one per cent. Producers expect the market to grow by 2% this year. But first of all, it needs to recover. Its size at the moment remains at previous year’s level.”

Ruslan Abdulnasyrov, director general of Avtoset.rf, head of Tatarstan Car Dealers association, shares the same opinion:

“This year, the situation with car supplies is still tense, there is a limited number of cars. There aren’t semi-conductors, this is why cars aren’t manufactured in a necessary amount.”

According to Abdulnasyrov, during the period when supplies are limited, there is always high demand: “It is impossible to determine the real size of the market this year. It will be clear how much the market can give when there is a surplus of cars.”

Stability of LADA, a sprint of Skoda and Mazda

LADA is traditionally the leader among brands in the Russian car market, its sales have risen by 47% in January-April and amounted to 121,839 cars. To compare, 114,679 cars were sold during the same period in 2019. In other words, LADA demonstrated about 6% growth in the last two years.

KIA holds the second place in car sales — the Koreans have sold 70,725 cars in Russia (+26%). KIA, by the way, is a leader in the market of foreign cars. For instance, sales haven’t recovered yet since 2019. In 2019, 72,801 cars were sold for four months (-3% in two years).

Hyundai ranks third with 55,607 cars sold, which is 26% more than the analogous number a year ago. In 2019, 2% more cars were sold during the first four months in 2019 — 56,892.

Candidates in fourth and fifth places in the rating demonstrated quite good growth of sales. So Renault has been chosen by 44,321 clients (+26% against last year). Skoda is fifth, its sales have reached 33,167 (+38% against last year). And even in comparison with the analogous period in 2019, the sales of these brands have increased by 6% and 29% respectively.

Toyota (31,765, +7%), Volkswagen (31,426, +17%), Nissan (17,408, -10%), commercial GAZ (14,784, +11%), Mazda (10,546, +27%) are also in the top 10 most sold brands in January-April 2021.

Nissan, which illustrated another 10% reduction even despite the crisis in 2010, and commercial GAZ haven’t bounced back after last year’s decline in sales among the last five brands. Though the latter grew by 11%, it hasn’t reached the previous numbers compared to 2019 (-12% against four months in 2019).

This year, Yevgeny Yeskov says, localised brands have shown the best result. This is why if some brands leave Russia, it will be a brand without a plant (in Russia). It is very tough for them to compete with the difference in the rate and price hike, the expert considers.

What about brands?

If we have a closer look at car sales, the affordable LADA Granta whose sales have increased by 35% and made up 44,246 cars will turn out the most sold brand in Russia from January to April.

Second place is occupied by the Russian LADA Vesta with 35,049 cars, which is 18% more than last year.

KIA Rio is third — 31,634 cars (28%). It is followed by the low-cost Hyundai Creta with 25,768 cars (30%). Then it is Hyundai Solaris whose sales also have significantly increased (by 58%) — to 20,103 cars.

It is curious that LADA Niva with growth (49%) to 18,540 cars. 17,345 Volkswagen Polo cars have been sold, which is 22% above last year’s number. 14,189 clients have chosen Toyota RAV4, which is 16% more than last year. Second-generation Skoda Rapid has found 13,918 new hosts. Volkswagen Tiguan with 12,525 sold cars (21%) is the last in the top 10.

Prices are going up

“Prices keep growing. Last year, the average price for a new mass-market car rose by 4%. Prices will grow, while the population’s real income didn’t grow and won’t grow. Solvent demand has reduced over the year, it will go down,” Yeskov thinks.

In his opinion, public support, which was absent during the whole quarter, is a very important factor.

Ruslan Abdulnasyrov noted the growth in prices too:

“Prices have grown and are growing constantly from one to three times in a quarter. This varies depending on the manufacturer. VAZ has already raised prices three times this year. Every rise is 2 and 3%.”

Among the reasons, he firstly named the prime cost, then the difference in the currency rate.

Yevgeny Yeskov supposes that manufacturers never raise prices immediately, they do it step by step and try to keep the prices for as long as possible. But prices will anyway go up because of the difference in currency rates. Even those cars that are assembled in Russia have enough components that are purchased with foreign money, consequently, this needs to be somehow compensated. “Prices will anyway rise,” Yevgeny Yeskov concluded.

Over 1,6 million sold cars

The Association of European Businesses forecasts that 1 million 632 cars and light commercial vehicles will be sold in Russia in 2021, which is equal to the market’s 2,1% growth.

Yeskov expects this year’s result to be on a par with that of last year, perhaps a bit better. Leaders of the market, for instance, KIA and Hyundai as well as LADA will fight for a market share, try to increase it.

As for the tendency of growing demand for cheaper and economical cars, the expert thinks it has been seen for long:

“The C-class is already vague, it is disappearing, it doesn’t almost exist. The small class and compact crossovers are the foundation of the whole market. Purchasers mostly choose more affordable options. Some people can choose a car they want, but their number is becoming smaller and smaller. Solvent demand is shrinking, consequently, citizens of our country have fewer possibilities of buying a new car. Somebody is going to the second-hand car market, it is actively developing. Now official dealers are actively entering it. There is such a tendency, and it is not new.”

While Ruslan Abdulnasyrov is less optimistic: “Manufacturers have warned dealers that this year there won’t be enough cars. This year sales will be below 2019.”

By Yevgeny Khramov
Tatarstan