According to our macro team, car sales in May printed the sharpest fall since the 2008-09 crisis, outstripping last year's plunge (the sequential drop was -4.9% MoM SA). This time, albeit local brands slightly softened the pace of the decline (-13% vs. -15% YoY a month ago), the contraction in standard foreign brands intensified to a four-year low, weighing on the headline indicator. While the scale of the fall can partly be linked to the import-related purchases in February-March 2014 (against the background of a sell-off in RUB), the broad picture remains bearish and signals a further moderation in consumer spending.
May sales for standalone Sollers were down 26% YoY, while YTD sales fell 21% YoY. Ford Sollers (50:50 JV) saw Ford sales dropping 56% in May and 35% in January-May, again mostly driven by the poor performance of Focus (-68% in May and -55% YTD). We note that Ford Sollers suspended production of the Focus in Russia in May, which might have exacerbated the decline. Sales excluding Focus are up 6% YTD, but also down 34% in May. Overall, we continue to see long-term value in Sollers, as its valuation remains hardly demanding, although the latest sales data along with the stock becoming ex-dividend today could put some pressure on the stock's performance in the short term.
AvtoVAZ outperformed the market for the first time, with its sales falling 10% YoY in May (-14% YTD). We continue to like the stock as a potential turnaround story on the back of internal efficiency improvements. A gradual improvement in sales is also supportive, in our view.
GAZ LCV sales declined 20% in May and 17% in January-May. Corporate governance remains our key concern here.