The pace of decline has been relatively stable of late (-8% in July and -11% in June), with the YoY comparisons in August negatively affected by a spike in vehicle sales in August 2012.
This is confirmed by the monthly growth in car sales recovering to 1.3% in August on a SA basis (from -0.8% in July) due to a bounce back in sales of Lada and ex-premium foreign brands, according to our macro team. The straightforward YoY reading was distorted by one-off spike in August 2012 on Russia’s WTO accession as well as one working day less this August than a year ago. Furthermore, the WDA YoY decline kept softening: it was -9.0% last month from -9.25% in July. Hence, we would not be too sceptical about August’s deterioration in YoY growth and expect a gradual recovery ahead (i.e. slower pace of contraction) mainly on the back of the beneficial base effect and the government incentive launched in July 2013. Still, a double-digit decline remains alarming, indicating that household consumption, the key growth driver, is losing momentum.
Sollers’ sales fell 10% YoY in August and 4% YTD. This was driven by the weakness in UAZ sales (-21% in August), which was partly offset by strong SsangYong sales (+10% in August). Ford sales (carried out through the 50:50 Ford Sollers JV) fell 17% in August and 18% YTD, driven primarily by the persisting poor performance of the Ford Focus (on the back of the weakness of its market segment). Ford sales excluding the Focus rose 2% in August but are down 1% YTD. Despite the market slowdown, we still see Sollers as undervalued. The stock remains our top pick in the Russian auto universe and we are reiterating our Buy recommendation.
GAZ’s LCV sales in Russia fell 12% in August and 5% YTD, while AvtoVAZ's sales declined 24% in August and 13% YTD.