Russia’s car and LCV sales declined 17% YoY to 199,398 units in June, while 1H14 sales were down 8% YoY at 1.23mn, according to AEB.
Car sales in June missed our and the consensus forecasts (both called for a 9.0% YoY contraction) despite favourable YoY technical support. The pace of contraction for the standard foreign brands (which account for some 75% of the market) quickened in 2Q14, and was the main drag on the headline number. Local names (from a historical perspective) proved more resilient against quickening declines, while the premium segment remained in the black. With such a fall in total sales, a substantial upturn in car output looks even more fragile over the medium term: our call for consumption moderation is supported by our latest macro forecasts.
We believe that the decline was driven by two trends. First, we estimate that rouble depreciation has meant a 4–7% price increase on most foreign brands in 2Q14; consumers are still adjusting to new price levels, in our view. And second, this price hike has not fully offset rouble weakness, which has reduced the number of promotional deals on offer.