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Car and LCV sales – down 5.5% in 2013

Russia's car and LCV sales declined 5.5% YoY to 2.78mn units, according to AEB. Meanwhile, car and LCV sales rose 4% YoY in December, which was the first positive monthly return since February 2013.

The results show the continuing trend toward market stabilisation and are slightly above our expectation of a 6% decline in car sales this year, mostly due to the better than expected December sales. Still, we would treat the December rebound with a degree of caution, as it could have been influenced by the expiration of the government programme of subsidised car loans in December, as well as different promotions. We would not be surprised to see some moderation in growth in January and February and a rebound later, mostly due to the favourable base effect. Our current forecast for 2014 envisages a 1% increase in car sales; AEB (which is effectively a consensus estimate of key market players) forecasts a 1.6% decline in car and LCV sales in 2014.

Sollers and AvtoVAZ​ had already reported their sales. For this reason, the key interest is Ford sales (carried out through the 50:50 JV with Sollers) and GAZ's LCV sales.

Ford sales fell 18% YoY, driven by a 27% decline in Ford Focus sales, which accounted for 63% of total Ford sales ​in 2013. Meanwhile, the decline of Ford Focus has been moderating lately, while sales of Ford vehicles excluding the Focus were up 3% YoY in 2013 and 11% YoY in December. This bodes well for our view that the stabilisation of Focus sales along with ramping up production of other models will help reverse the negative trend in Ford sales. We continue to see the JV as the key value driver for Sollers, which remains our top pick in the Russian auto space.

GAZ's LCV sales fell 9% YoY in 2013 and 20% in December. Our key concern remains corporate governance, which underlies our Hold recommendation on both ords and prefs.

Vladimir Bespalov, Vladimir Kolychev, Daria Isakova
VTB Capital analyst

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