In our view, the March improvement was driven by i) purchases of still RUB-priced foreign brands amid RUB depreciation and ii) the more favourable base effect as the auto market began to fall in March 2013. These positive effects could support the market in April, but the gains might be reversed in the summer, when higher rouble prices start to reflect the effects of rouble depreciation. From the broad perspective, the car market is still lingering on the edge of stagnation, according to our macro team. In a nutshell, we would not be too upbeat about the 1Q14 advance as the beneficial base effect is unlikely to compensate for deteriorating business confidence and slower real wages growth in the coming months.
Sollers' sales were down 17% in March (-10% for SsangYong and -19% for UAZ) and 23% in 1Q14 (-19% for SsangYong and -25% UAZ). The decline was partly driven by an increase in SsangYong prices to support margins (while many competitors are still delaying such increases) and an overhaul of the paint shop at UAZ in early 2014. Ford Sollers’ sales declined 33% in March and 27% in 1Q14. The Ford Focus remains the key reason. Moreover, a one-off spike in Focus sales in March 2013 negatively affected YoY comparisons for the month. Ford sales excluding Focus were up 39% in March and 30% in 1Q14, which supports our view that launching and ramping up the production of new models, especially SUVs, will likely help stabilise sales.
GAZ's LCV sales are down 8% YoY in March and 17% in 1Q14. AvtoVAZ's car sales fell 8% in March and 15% in 1Q14.
We continue to like Sollers (cheap valuation) and AvtoVAZ (turnaround story).