The firm’s latest data shows the Russian light-vehicle market posted the highest rate of decline so far in 2014 in April with an 8% year-on-year fall to 226,526 units, according to the latest set of data released by the Association of European Businesses (AEB) which collates vehicle sales data in Russia.

April’s result accelerated the fall in sales volume in the first four months of the year to 4% y/y which equated to a number of 829,406 units. The AEB’s manufacturers committee chairman Joerg Schreiber said: ‘After a brief spell of recovery, the market is falling back into negative territory. It is obvious that recent price increases forced by a weaker rouble are taking their toll on a consumer demand which had been fragile to begin with. In the framework of a sluggish economy, this situation is unlikely to change.’

April’s fall in sales followed March’s neutral result. IHS Automotive Analyst Tim Urquhart said: ‘There are likely to be some negative calendar effects at play in the downturn witnessed in April but the main factor as outlined above is the weakness of the Russia currency which is putting up the prices of foreign vehicles, whether they are manufactured in Russia with a significant proportion of imported components, or completely built up (CBU) imports. The currency was at a record low against the US dollar at the beginning of the year and has fallen another 8% since then, and the general weakness of the Russian economy and the ongoing tensions between Russia and Ukraine are hardly helping to foster a buying environment.’

He added: ‘The Russian economy remains overly dependent on energy export revenues (fully 70.6% of total export earnings in 2013) to drive domestic growth. Energy prices are expected to remain relatively stable at somewhat lower than recent levels in the near to medium term while physical exports will grow only very slowly. With the rouble and equity prices losing ground in early 2014 owing to poor performance reported by all of the BRIC countries (Brazil, Russia, India, China) and the prospect of tapering of quantitative easing by the US Federal Reserve, the threat of economic sanctions due to Russia’s annexation of the Crimean region of Ukraine will only worsen the environment. Investment activity has slackened because of eroding business confidence, while consumers are facing stubbornly high inflation buoyed by a weakening rouble. To defend the rouble, the key interest rate was raised by 150 basis points, which is also likely to have a negative impact on growth.

‘Accordingly, IHS cut our forecast for GDP growth in 2014 from 2.5% to just 1.7%. Further sanctions could convince us to cut this forecast further, while a concerted multilateral effort could push the Russian economy into recession. IHS Automotive is forecasting a full-year decline of 7% y/y fall in sales from 2013’s figure to 2.59 million units due to ongoing macro turbulence and ongoing uncertainty surrounding the situation in Ukraine.’