According to our macro team, WDA the pace of the YoY decline slackened slightly last month to 1.6% (from 2.7% in January). Nevertheless it is too early to conclude a turnaround on the market as it led by escalated demand on foreign brands. February’s pick-up in foreign brands seems to be temporary: amid sharp RUB weakness, households rushed to buy cars, expecting higher prices ahead. So, the report revealed a shift in demand for cars from March-May (or even further) to February. Deteriorating business confidence and slower real wages growth are likely to dampen consumption in quarters to come.
Sollers' sales were down 27% to 4,915 vehicles in February and 26% to 8,474 vehicles in 2mo14, with both UAZ and SsangYong sales declining more than 20%. Ford sales (carried out through the 50:50 JV with Sollers) were down 11% in February and 21% in 2mo14, driven by the persistent weakness of the Focus. Meanwhile, Ford sales excluding Focus were up 35% in February and up 24% in 2mo14. We believe that this trend of stabilising Focus sales and increasing other Ford sales might result in Ford sales finally moving into positive territory later this year, although not as early as in March. Meanwhile, we believe that the recent decline of Sollers' share price more than factors in the recent negatives and the stock is attractive at current price levels.
AvtoVAZ sales in Russia fell 16% in February and 19% YTD. Meanwhile, our positive view on both ords and prefs is based on the ongoing restructuring, rather than on market trends.