Trouble for the Ruble Puts Russian Auto Industry in Bubble

Published By : 18 Dec 2014 | Published By : QYRESEARCH

The first half of 2014 was a prosperous time for the Russian economy, boosted by the 2014 Sochi Winter Olympics. However, Russia’s political isolation has led to a downward spiral since the culmination of the controversial sport epic. Coming on the back of Russia’s ostracization due to Putin’s stubborn stance on the issue of the Crimean Peninsula, its declaration that it is staring down the barrel of recession in 2015 has sent the Russian economy in a tizzy.

The subsequent drop in oil prices, which fell below US$60/barrel for the first time in years, has caused massive repercussions in Russia, whose economy relies heavily on its export of oil at US$100/barrel. As a result, the Russian Ruble is now at a record low, having fallen by 50% in 2014.

The threat of oncoming recession, though, has powered up some industries, as people try to stock up consumer goods before the Ruble’s depreciation worsens. The auto industry is one of them, with retail sales enjoying a short-term boost in anticipation of significant price hikes. Global automotive giants Ford and Toyota have already shown their hand by increasing their investment in their Russian plants.

Opinions are divided on whether this is a prudent long-term policy, as it wouldn’t be a surprise either way if Russia comes out of the recent economic slumber and marches on as the leading auto market in Europe, or if it slips deeper into the pits of recession in the next 12 months. What is undeniable is that the silver lining has begun to shine, even if the cloud doesn’t clear.
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