Although the headline numbers for the first two months of the year are positive, we believe that the market remains in slowdown mode, and we do not expect any major breakthroughs in the coming months.
According to our macro team, on an SA basis, car sales growth surprisingly picked up 4.1% MoM in February (from 0.4% MoM in a month ago), supported by stronger performance by Russian brands, despite the unfavourable base effect. However, given that the overall economic picture remains fragile (with low wage growth and tighter fiscal spending growth), we do not expect to see further positive surprises in the sector. In March, we forecast a YoY contraction in car sales as February’s MoM SA spike will likely to turn into a decline.
We also believe that such market trends are not likely to support strong Russian automotive stock performance in the short term. Among Russian producers, Sollers and GAZ outperformed the market. In particular, Sollers sales increased 7% YoY in February (+7% YTD), while GAZ LCV sales were up 6% (+5% YTD). Meanwhile, Ford sales, which are carried out through a 50:50 JV with Sollers dropped 23% in February (-15% YTD), which was partly driven by production readjustments. AvtoVAZ remains an underperformer, with its sales flat in February and up 2% YTD.