The achievements of this market are interesting not only because of its dynamics. Remarkably, last year Russians spent as much on cars as the French, outrunning Spaniards and Belgians. Yet the Russian car market is still developing. By 2010, it is expected to outrun the British and Italian markets, which are Europe's No. 2 and No. 3, PwC analysts predict. Only the German market's performance remains unattainable so far.
As price characteristics of the Russian car market change, so does its structure. The data available at the end of 2006 show that the domestic car industry has ceded its leading position in monetary terms. 2006 was a year of foreign cars for Russians.
Russians spent only $5.8 billion on domestic cars against $18.2 billion on foreign makes. Foreign cars assembled in Russia as part of the government program of industrial assembly are gaining popularity. Their sales amounted to $4.4 billion.
The domestic car manufacture grew by mere 5% in monetary terms last year, whereas sales of imported foreign cars soared by 78% and of foreign cars assembled in Russia by 100%. At the same time, sales of used cars fell by 13% in monetary terms.
However, foreign cars outran those made in Russia not only in monetary terms. For the first time in history, the number of sold foreign cars exceeded that of domestic cars. Sales of foreign cars grew significantly, while of Russian cars fell by 5%.
Experts believe that the share of foreign cars on the Russian market will continue growing in 2007. This prediction is substantiated by the announcement made in December that three more assembly plants are set to appear in Russia. Mitsubishi Jidosha announced its intention to build a car assembly plant near St. Petersburg, in cooperation with Peugeot-Citroen. The first car made by the plant, a Lancer, will appear on the Russian market in 2010. About the same time, it may start assembling two other C-class cars, Citroen C4 and Peugeot 308.
Some time earlier, Nissan and Suzuki announced their plans to set up a joint car assembly in Russia.
At present, Russia assembles Ford Focus and Renault Logan. Toyota and Volkswagen will complete the construction of their assembly plants in the near future. In addition, several GM cars and some South Korean makes, notably, Hyundai, Kia and Ssang Yong are assembled in Russia.
To be fair, the key domestic car manufacturer, AvtoVAZ, is preparing an adequate response. By 2010, it hopes to develop a series of modern C-class cars. It even plans to build a new plant with a capacity of 450,000 cars annually together with Magna. This cooperation can result in a high quality and modern car. But will it be able to join the ongoing competition between foreign producers for the Russian market? Russian carmakers with their outdated cars first ceded the market to used cars from Europe and are now losing the battle to foreign cars assembled in Russia.
