The automotive industry has been one of the most affected in a recession which has severely depleted the developed markets and has slowed the pace of growth in developing economies. Auto majors like GM, Ford and even Toyota have struggled to cope with the dramatic drop in sales and are struggling to find lucrative markets which could provide a fillip to their sales. Russia and the CIS provide one such haven to these companies. Coming on the back of a remarkable 2007, auto sales in Russia grew at 41 percent for the first six months of 2008. Moreover, the Russian domestic output is expected to reach 3.2 million units by 2012 according to PwC estimates. So, what has been driving growth in Russia, firstly it’s the economic performance of the country. The GDP has been growing at a fair clip and though the recession would take its toll, Russia is among the favorites to outperform the global markets. The second reason is the fast paced growth of the Russian middle-class, which is looking to improve their quality of life with better disposable income. Thirdly, the foreign investment which the country is attracting, major automakers already present in the country are expanding their capacity, while the others are speeding up their investment pipeline. Moreover, the country has witnessed significant growth in car finance market with a number of new players joining the fray which includes OEMs banks and credit instruments, thereby encouraging purchase of new cars. This makes Russia, the place to be in for auto companies. It already occupies third and sixth position respectively in terms of passenger car sales in Europe and World markets. Another important aspect in the growth of Russian auto market is the growing preference for luxury cars. This means auto makers could look to sell their luxury brands on which they earn better margins. That being said, budget cars as they are mentioned in Russia are highly popular primarily outside of cities. According to an E&Y estimate, the size of Russian auto market would reach around 4.4 million units by the end of 2012. Thus, there is definitely growth potential for the Russian market. However, it does come with its own set of bottlenecks. The lack of service maintenance is a top concern which might negatively affect the sale of cars in the future. Dealers’ revenue from new car sales is on the decline which is pushing them to look for new alternatives such as used car sales. However, there is an air of optimism which surrounds the Russian automotive industry, and with the aggressive stance of Private Equity players as well as of major OEMs, the country is certain to become one of the largest markets in the world. Category:Home › Autos • Will the trend toward economy-size car models lead Americans back to buying smaller-sized cars? — part 2 • You should never use after-market auto parts when maintaining or fixing your car • Should a new car be rust-proofed? • Will the trend toward economy-size car models lead Americans back to buying smaller-sized cars? — part 1 • Five safest cars in North America • How to ensure your teen drives safely after getting a license • Pros and cons of using an hydrogen generator for your car • DIY automotive maintenance: How to change the oil
