Looking at the potential OEM and supplier implications, the firm pointed to the latest iteration of Russia’s Decree 166 government policy, which is the regulatory framework for investing in the Russian automotive industry for foreign OEMs and Tier 1 and Tier 2 suppliers. Instead of encouraging investment through tax breaks or other incentives, the Russian government has looked to compel foreign OEMs to form partnerships with local assemblers with a commitment to manufacturing in excess of 300,000 units. IHS added that these entry conditions are difficult for new OEMs to satisfy, with Fiat in particular long having struggled to come up with a cohesive plan to manufacture in Russia in a way that makes commercial sense.

The firm commented: ‘Given the current situation in Crimea, it is of course highly likely any pending negotiations over JV investment or investments in supplier plants will be put on hold. OEMs and suppliers are also likely to be increasingly wary in the future in terms of committing to fresh investment. It is also true that with its planned takeover of AvtoVAZ, and associated shared production operations with the company, as well as standalone production operations in Russia, Renault/Nissan has the most to lose if the situation deteriorates.’

IHS continued: ‘However, it is too early to give any definitive predictions of what the implications of the situation in Crimea will be for individual OEMs as the geo-political and military situation on the ground is developing rapidly and remains fluid.

Looking at the implications for the Russian sales forecast, IHS Automotive analysts said they consider that all the current negative developments in Russian economy (Rouble depreciation, inflation, lack of investments and capital outflow) will accelerate by possible sanctions from western countries and organizations as a result of the dispute between Ukraine and Russia.

The firm added: ‘For our base line we will slightly reduce our forecast from -3.8% market decline in 2014 (January Forecast) to -7% (March Forecast). In the base scenario we consider the implementation of intense diplomacy to resolve the Crimea conflict and some easing of the situation immediately after new presidential elections in May 2014. In our pessimistic scenario we consider prolonged armed conflict in the region and implementation of sanctions against Russia. In this case Russia will suffer not only from sanctions but also from deterioration of its image as a country to invest to. According to our pessimistic outlook, the LVS market will fall 10% this year and post a negative growth rate next year too. The market is expected to gain momentum in 2016.’

It added: ‘For the Ukrainian sales forecast, we would expect a decline by 6.8% compared with the previous year, e.g. from 218,164 to 203,403 units in terms of registrations (statistics used in IHS Cornerstone). In terms of sales (official statistics used by the Ukrainian Automotive Association UkrAutoProm), the figures would be a bit different: 213,322 units in 2013 and 202,796 units in 2014.

The firm also outlined the reasons why its analysts don’t expect a more serious decline in 2014 despite the political turmoil, including the fact that surprisingly, in the first two months of 2014 sales were growing.

Other factors include expected general financial assistance from the Ukraine’s partners in the West after the elections on 25th May and that the “provisional” government of Ukraine has stated that it would take up negotiations on the Association Agreement with the EU, which were put on hold by the previous Ukrainian leadership. One of the preconditions for signing this agreement was that Ukraine abolishes the additional customs duties on cars with the engine volume of 1.0 to 2.2 litre.