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Russia's car and LCV sales slow

 
12.11.2012

Russia's car and LCV sales increased 5% YoY in October, with YTD growth of 13%, according to the Association of European Businesses.

The YoY growth rate has declined to single digits for the first time since the start of the year, although this is fully in line with our expectations. According to our macro team, on a seasonally adjusted basis, car sales surprised to the downside in October with a 5.8% MoM decline. A drop in sales on a seasonally adjusted MoM basis was widespread: both Lada and foreign brand sales were affected. Weak car sales are in line with our base case macro scenario of economic growth slowdown, and confirm idea that slowing lending and higher deposit interest rates are leading to weaker consumer spending.

We believe that the YoY growth in car sales will remain in the single digit territory in the coming months, but will rebound slightly in next couple of months on seasonally adjusted basis.

Russian producers underperformed the market in October. Sollers saw just a 2% YoY growth in vehicle sale in October, although its YTD sales are still up 19%. Ford sales, which are carried out through a 50:50 JV between Ford and Sollers, saw a 15% decline in October, but remain in line with the market YTD (+13%). We believe that this relatively poor result in October could be partly explained by the base effect as the launch of Ford Focus III in 2H11, which gave a strong boost to the company's sales a year ago. GAZ LCV sales declined 3% YoY in October and are 1% down YTD, which is broadly in line with our expectations of flat LCV sales this year.

We believe that Sollers and GAZ retain their fundamental upside. Still, the market's slowdown, coupled with Sollers' recent strong run and GAZ's low liquidity are likely to result in cautious sentiment toward the stocks in coming months.

AvtoVAZ increased its car sales 2% YoY (YTD contraction remains at 9%), but we still believe that the company needs to go a long way to turn into an attractive investment story. 

Vladimir Bespalov, Maxim Oreshkin, Daria Isakova
VTB Capital analyst

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