This means that Russian car sales have tripled since 2002, and this country now sells just about as many cars as the United Kingdom does. Foreign and Russian car sales total $20 billion and $10 billion, respectively.
One finds it hard to believe that the local market may never post such record-breaking growth again.
Only about 150,000 foreign cars were sold here in 2002. This year, the market offered one million Russian and one million foreign cars, some of which were imported, and the rest assembled in Russia.
However, the auto market has not yet become saturated because Russia is such a vast country.
The Economic Development and Trade Ministry said about $2 billion will be invested into foreign car production in Russia under a government-approved plan.
Virtually all major auto manufacturers, i.e. U.S. automotive giants Ford Motors and GM, Japan's Toyota and Nissan, France's Renault and German Volkswagen, which operate knock-down production facilities in Russia, have now signed special agreements allowing them to pay low customs duties on all imported components.
Moscow is currently drafting similar agreements with other foreign partners.
Western carmakers are preparing to expand their operations on the rapidly growing Russian market. Iwao Ohashi, chief representative in Russia and Eurasia of the Japan External Trade Organization, said any Japanese automotive plant establishing its production facilities outside the country is subsequently followed by component manufacturers.
Ohashi said this is possible only if local car production tops 50,000 vehicles per year. This year, Toyota, Nissan and Mitsubishi, which sold 87,000, 67,000 and 61,000 cars in Russia respectively, were defeated by Chevrolet, Ford Motors and South Korea's Hyundai with 100,000, 95,000 and 91,000 vehicles each. All these companies boosted sales by over 50% in 2006.
The market may expand soon because most foreign companies will be producing and selling over 100,000 cars each in 2007.
PriceWaterhouseCoopers (PwC) experts said another one million vehicles may be sold on the local car market in the next decade if this trend persists.
Analysts said several conditions have to be met in order to attain this goal; otherwise the market will develop much slower.
Stanley Ruth, head of a PwC group for cooperation with automotive companies in Russia, said the market is now being saturated, especially in such large cities as Moscow and St Petersburg. According to Ruth, the market faces serious problems- a rudimentary infrastructure, the absence of a civilized market for second-hand cars and the lack of facilities for recycling old cars.
The growth is expected to slow down as carmakers expand to Russian provinces.
An old Soviet-era joke implying that motorists are only happy when they buy and sell their cars still holds true.
It is easy to buy a car in Russia, since numerous payment plans are widely available for those who cannot afford to purchase a car straight out. However, the rudimentary used car market cannot absorb all used or malfunctioning cars. Moreover, there are no car recycling facilities in this country.
Russian motorists face major traffic jams, and parking is a serious problem. Consequently, not many urban residents are eager to drive around.
Car demand may drop appreciably, unless the government steps in to rectify the situation.
