According to JATO Dynamics, by 2012, the Russian car market had recovered to 2,950,000 units, with the help of a government-supported scrappage scheme. The market had built up from 1,100,000 units in 2000 to 2,800,000 in 2008, followed by a 51% drop in sales in 2009, when the market fell to 1,372,000 units. According to JATO, the car market now tends to be dependent on the changes in oil prices rather than the stock market.

Russian manufacturer AvtoVAZ, which produces Lada cars, is the market leader, as it was in 2012. As explained later, the company is controlled by the Renault-Nissan Alliance. The Lada Granta – launched in 2011 – a compact four-door saloon, is Russia’s best selling car so far in 2013. Renault is also a strong performer in Russia, where it sells Dacia models branded Renault. The Duster seems to have been performing well – currently the sixth best selling car in the country, according to data from focus2move.com. Both Kia and Hyundai are performing well in the Russian market, with the Hyundai Solaris the second best selling car in Russia and the Kia Rio compact five-door in fourth place.

To add further confusion, the Chevrolet Niva is a GM product – a compact SUV with permanent 4×4, based on the Lada Niva.

Commercial vehicles

Where commercial vehicles are concerned, data from the Association of European Businesses Russian Federation (AEB) shows that some 188,095 new light commercial vehicles were sold in Russia in 2012, with Russian manufacturer GAZ taking 48% of the market with 90,247 sales. Of the top five sellers, three – Volkswagen, Ford and Peugeot – are Western European brands.

Hyundai led the market for middleweight trucks between 6.0 and 16.0-tonnes in 2012, despite a 20% drop in sales from 2011. Overall the market rose 14% to 11,522 units.

Heavy truck sales over 16-tonnes GVW slowed by 12% in 2012 to 25,937, with the market led by MAN (7,620 units), up 6% on 2011, followed by Scania with 5,823 units, down 14% and Russian truck maker URAL down 48% in third place to 5,295. By contrast Mercedes saw sales rise by 80% to 4,854 and Renault Trucks also saw sales rise 22% to secure fifth place with 1,642 sales.

As Kent Bjertrup, general manager of ALD Russia, told us, it is difficult to estimate the size of the business car market: ‘We don’t have any official statistics that we can use as sources, so we work together with the AEB. We consider that 195,000 new cars were registered to legal entities in 2012. That represents approximately 6% of the total new car market.’

JATO’s estimate is quite similar. The organisation says the approximate fleet size of passenger cars and LCVs in Russia is about 650,000 vehicles. But if we take out town buses and taxis from these figures (approx 250,000) and around 150,000 delivery vans, that leaves around 100,000 in company fleets and around 100,000 others.

Western European manufacturers enjoy a strong presence in the Russian car market. Among the most popular brands, JATO lists GAZ, a Russian manufacturer of light CVs, Ford, Renault, VW and Peugeot. According to JATO, Hyundai is the market leader in passenger car sales.

Data from ALD paints a slightly different picture, but it may contain a mix of cars and light CVs.

For business use, JATO identifies C-segment passenger cars and LCVs as the most popular vehicles. For ALD, the most popular car on their Russian fleet is the Ford Focus, with the Polo sedan in second place. Renault is third most popular with a Dacia Logan branded as the Renault Logan. The top 10 is completed with Skoda, Nissan, Chevrolet, Citroën, Mitsubishi, Volvo, and Audi. Altogether, ALD operates around 15,000 cars in Russia.

According to the data above, AvtoVAZ seems to be the Russian car market leader, although as already noted, JATO suggests that Hyundai leads the passenger car market. Without official data, it is not possible to confirm the position, but as we have pointed out, it could be a matter of how vehicles are defined.

Investment in the Russian Car Market

AvtoVAZ used to produce cars under the VAZ brand name and also produces Lada cars. Today Renault owns a significant stake, 25% until late last year. In December 2012 the Renault-Nissan Alliance and the State owned Russian Technologies created a joint venture to accelerate product launches and technology transfer to AvtoVAZ. Under the deal, Renault-Nissan has a majority stake in the joint venture, which is called Alliance Rostec Auto BV, which will control AvtoVAZ.

Under the deal, Renault-Nissan will invest €567m. This will give the company a 67.13% stake in the joint venture by mid-2014, split 50.1% Renault and 17.03% Nissan. Russian Technologies will hold the remaining 32.87%. Nissan has not had a stake in AvtoVAZ before. By 2014, Alliance Rostec Auto BV will hold a 74.5% stake in AvtoVAZ.

AvtoVAZ opened a new 350,000 unit capacity factory at Togliatti in Russia earlier in 2012. The Nissan Almera has been produced there since December 2012 and the plant also produces the Lada Largus. Five Renault, Lada and Nissan models will soon be built in the plant. By 2016 Renault-Nissan and AvtoVAZ will have a Russian production capacity of 1.7 million cars and by 2020, production is expected to have reached 1.0 million cars.

GM has also been stepping up its presence in Russia. In June 2012, construction began on expanding its facility in St Petersburg, which will more than double GM’s manufacturing capacity by 2015 from 98,000 vehicles to 230,000. GM formed a partnership with the Russian Federal Ministry of Economic Development which will result in GM investing US$1bn (€0.76bn) in its Russian operations by 2017. The investment will also support GM’s joint venture with AvtoVAZ at Togliatti, which GM says will increase Russian capacity to a total of 350,000. When the expansion is complete, GM will increase the workforce at St Petersburg from 2,500 to 4,000. Chevrolet and Opel-badged models will be produced for the Russian market including the Opel Astra saloon, launched at the Moscow Show last August.

GM also has a deal with the GAZ Group, which manufactures the Chevrolet Aveo in Russia. GAZ also has contract manufacturing deals with the Volkswagen Group and Daimler. The company withdrew from loss-making car production operations after former GM vice president, Bo Andersson, was appointed president and CEO in 2009. Now it is focused on contract manufacturing and light CV production.

Business Car Taxation

Russia has recently changed the taxes payable by businesses, as ALD’s Kent Bjertrup, explains: ‘Legal entities including the leasing business had to pay a property tax on cars until 1 January 2013. Today we pay some sort of usage or transport tax, calculated on the horsepower of the car.’ The tax is banded and as Mr Bjertrup explains, for cars with more than 250hp, it gets expensive: ‘We’re trying to sell an Audi Q7 4.2 just now with 350hp, and that’s approximately €2,000 per year in taxes and that also affects the used car price for this kind of car. Then if a manufacturer does not have local production, import tax is applied to the car.’

Vehicle finance is expensive because interest rates in Russia are high – around 15% at the time of writing and insurance premiums are also high, according to Kent Bjertrup. Even so, JATO Dynamics says that finance leasing and loans make up 60% of the financing of business vehicles, while cash purchase accounts for 35% and operational leasing accounts for 5%. Kent Bjertrup says things are different for ALD: ‘We say that approximately 7% of corporate market cars are financed by outright purchase. Finance lease is around 17-19%, then full service leasing is 6.0-8.0%.’ ALD has been in the Russian market for around eight years, Arval followed around 18 months later and LeasePlan will open in 2013.

Panel damage appears to be a problem for cars in Russia too, which helps to push up the price of insurance.

ALD expects the Russian passenger car market to grow at around 5% this year. Full-service leasing has been growing at between 18-22% for ALD, ‘We expect somewhere between 10-15% growth,’ says Kent Bjertrup.

JATO quotes VTB Leasing and Europlan to indicate finance leasing growth of around 40% in 2012.

‘In 2012 there was strong development in the trade, housing construction and road construction industries, which resulted in more LCV cars being required so it could be a trend that continues over the next few years’, reckons JATO. ‘It’ll also be interesting to see how the ongoing European economic challenges will affect Russian vehicle sales as many car manufacturers have been sending significant portions of stock to Russia, while offering impressive incentives because vehicle sales have been mostly poor across Europe.’