Market Drop in Russia Means Auto-manufacturers Risk losing US$2,000 on Every Car

Published By : 19 Mar 2015 | Published By : QYRESEARCH

Companies such as Renault SA, Volkswagen AG, and Ford Motor Co. persist to jockey for share in the Russian market, even as the demand for auto tumbles, setting them at risk of selling every automobile at a loss.

With price rise failing to go with the decline in Ruble, international auto-manufacturers can lose as much as US$2,000 on every automobile sold, as stated by Mr. Vladimir Mozhenkov, the chief of the Russian Association of Automobile Dealerships. The enthusiasm to take a strike in Russia stems from the predictions of the market to bounce back. In recent past, in 2011, the Russian President, Mr. Vladimir Putin bragged that the car market of Russia could beat Germany as the largest market in Europe by next year.

Mr. Mozhenkov, who represents car dealerships holding 40% of the total sales in Russia, stated in an interview that it is easy to dump the market, but not easy to return.

General Motors became the first chief automobile victim of the woes, declaring plans on Wednesday to pull its brand called Opel as well as model of Chevrolet from Russia. The move will cost the automaker based in Detroit around US$600 million.

Subsidized car sales in Russia created losses of US$800 million to US$900 million for the international automakers in the last two months of 2014 alone, estimates the association. Having the economy on the edge of recession, the condition has further got worse since then. The sales in the car segment dropped around 38% in February. The Russia’s Association of European Businesses stated that it was just the beginning.
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