Russia's car and LCV sales increased 11% YoY to 260,944 units in May, while YTD growth stood at 15% (over 1.1mnm vehicles), according to the latest report from the Association of European Businesses.
The continuing double-digit growth rate is encouraging, especially given that this year the market no longer enjoys various government support programmes, while a gradual slowdown compared with earlier months reflects the high base effect. We highlight that Sollers (excluding discontinued Fiat sales) is outperforming the market with YoY growth of 29% in January-May and 33% in May. Ford sales, which are carried out through a 50:50 JV between Ford and Sollers have also been strong (+24% YTD and +11% in May). In our view, Sollers has been heaviliy oversold lately, while its strong sales along with open and investor-friendly management and better liquidity compared with other Russian automotive stocks set a good scene for the stock's outperformance, once the overall equity market situation normalises.
GAZ increased LCV sales 2% in May and 1% YTD. This performance is broadly in line with our full-year expectations of flat sales. We continue to believe that GAZ is cheap from a fundamental perspective, but low liquidity prevents this fundamental upside from being unlocked.
AvtoVAZ's sales were down 11% in May and 13% YTD as the company, which was the key beneficiary of the state support last year, now has to rely on commercial sales. The ongoing replacement of AvtoVAZ's model range also has a negative impact on sales. We maintain our negative view on the stock.