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Automakers – subsidised car loans might return

The Russian government might re-launch its subsidised car loans programme, if car sales decline significantly in April and May, the deputy Minister for Industry and Trade Alexei Rakhmanov was quoted by Interfax as saying.

While the Russian car and LCV market was down just 2% in 1Q14 and flat in March, we believe that the situation might deteriorate in 2Q14, as market participants are likely to start to increase prices to factor in rouble depreciation. We believe that such a programme could help smoothen the negative effects of the market's potential sharp downturn, if it materialises, with domestic producers being key beneficiaries. Nevertheless, we believe that its overall effect on the investment cases of Russian auto stocks would be marginal – all the more so as its resumption is preconditioned on a significant deterioration of the market environment.

Our fundamental ratings and target prices for stocks in this sector can be found in the Market Data section of this report.

Vladimir Bespalov
VTB Capital analyst

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