Russia's car and LCV sales fell just 1.1% YoY to 229,439 units in November, following the 10% drop in October and over 20% declines in July-September. This brought the YTD decrease to 12%, with 2.2mn units being sold, according to the latest data from AEB.
We tend to attribute this improvement to the combined effect of the government’s 'cash-for-clunkers' programme and the sharp rouble depreciation, as customers rushed to buy foreign brands before the inevitable price hikes. This momentum could be sustained through December, but sales are likely to plunge again as early as 1Q15 due to price hikes and the unfavourable base effect.
In our view, the strong demand for foreign brands (sales were up 1% vs. the 10% decline in Russian brands) was largely driven by anticipated future price hikes, as market players are set gradually to shift the recent rouble depreciation on to consumers. In our view, this latest improvement will not last long, as the market's short-term fundamentals remain weak. Although the planned extension of the 'cash-for-clunkers' programme through 2015 is to help moderate the decline, we still see the downward trend accelerating early next year.
AvtoVAZ's sales fell 17% YoY in November and are down 16% YTD. The decline accelerated significantly (October sales in Russia were up 1% YoY). This was likely driven by AvtoVAZ suspending car sales under the government 'cash-for-clunkers' programme at the end of October as it had used up its entire quota. We note that sales under the programme resumed later, but the most popular cars, the Lada Granta and the Lada Largus, are now excluded from the programme. AvtoVAZ has also been experiencing problems with suppliers lately, which might also have affected its November car sales.
Sollers' sales rose 19% YoY in November, which reduced the YTD decline to 14%. The November performance was driven by a 29% increase in UAZ sales (-6% YTD), while SsangYong sales were down 3% in November and 27% YTD. The decline in Ford sales (through a 50:50 JV with Sollers) was 26% in November and 40% YTD. We note that the trend in Focus sales continues to deteriorate, while other Ford sales were up 22% YoY in November. We believe that the recent launch of the Ford EcoSport could well provide further support to Ford sales in the coming months, but rouble depreciation would continue to put pressure on the JV's performance.