Quite unexpectedly, car sales worsened across the board in October: sales of local brands dropped 24% YoY (vs. 19% YoY in September) and foreign brands fell 2.4% YoY (vs. 0.4%). Still, we believe that the October pause in the moderate recovery was a one-off, which could be linked to deferred demand as people are waiting for New Year sales. If this is true, we are to see a strong bounce back in November-December, which will also be supported by the beneficial base effect (as last year dealers launched promotions earlier amid worsening market conditions).
Meanwhile, we are maintaining our forecast of gradual moderation in consumer demand as consumers are less upbeat about their prospects (to recap, the LEVADA consumer confidence index continued to fall in October after a small rebound in September and reached the second lowest level since April 2011).
From the stock perspective, standalone Sollers (-18% YoY in October and -6% YoY YTD) and AvtoVAZ (-25% and -15%, respectively) had released their numbers before, so the key focus was Ford sales (through the 50:50 JV with Sollers), and GAZ LCV sales.
Ford sales fell 17% YoY in October and 19% YoY in 10mo13, driven by the persisting weakness of Ford Focus, which is suffering from the overall weakness in its segment. However, if Focus sales are excluded, Ford sales were up 25% in October and up 1% YTD. This bodes well for our view that the JV's sales could recover next year on the back of the ramping up production of new models.
GAZ LCV sales declined 10% YoY in October and 6% YTD. This worsening trend adds to the latest negative sentiment around the company, which is due to corporate governance issues and management changes.