“Takeovers of dealer companies are expected in Tatarstan” — RealnoeVremya.com
Senior expert of the asset management company Finam Management Management – on falling sales, parallel imports and consolidation of the Russian car market
Car sales in Russia have more than halved – only 369,000 cars were sold in the country compared to 934,000 last year. At the same time, the lion’s share, 80% of the market volume, is now occupied by Chinese cars, because it is too expensive to import European cars through parallel imports, according to representatives of the industry. The lifting of a number of restrictions and the launch of parallel industry imports have of course provided support, but sales will continue to decline, predicts Dmitry Baranov, a leading expert at the sales management company. Finam Management. In the author’s column for Realnoe Vremya, the expert analyzes the market situation and warns that mergers and acquisitions of dealership companies in Tatarstan should be expected.
Decrease of sales
The situation in the car market has not changed significantly for several summer months — sales continued to decline. So, according to the Committee of Automobile Manufacturers of the Association of European Businesses (AEB) in the Russian Federation, in January-July 2022, 368,850 new passenger and light commercial vehicles were sold in the country, or 60.5% less than in the same period of the previous year, when 933,896 units were sold.
In July, according to the AEB in Russia, sales amounted to 32,412 cars, which is 74.9% less than a year earlier — 129,231 cars. According to Rosstat, the production of passenger cars in the country in January-May 2022 amounted to 267,627 units, which is 56.4% less than in the same period last year, when 613,763 units were produced.
The main factor that continues to influence the automotive market is the decision taken earlier by a number of automakers to exit Russia, stop car supply and production facility operations. Another important factor is the difficult economic situation, which has led to a reduction in the income of citizens and businesses. As a result, many people decided not to buy cars, which affected sales momentum.
But this did not lead to a shortage in the domestic auto market, despite the fact that a number of foreign automakers left Russia. Demand was met through existing car stocks, as well as the activation of new car brands in the domestic market. In addition, the decline in car sales is explained by the coming summer season, the holiday period, many consumers have used leisure facilities, refusing to buy vehicles. In addition, the significant fluctuations in exchange rates in the spring and other macroeconomic factors had some impact on car sales, but they were gradually offset.
25,000 cars in parallel import
Government actions, such as the organization of parallel import and demand stimulation programs, as well as a number of other measures, have provided some support to car manufacturers and the car market as a whole. According to various estimates, the introduction of the parallel import procedure has increased the import of foreign cars into the country by 5-15%, and although it was launched recently, it offers good prospects, which will saturate the market.
There are already the first results of parallel imports: according to Autostat, 25,000 cars were imported into the country in July, but the share of new cars was only 32%, the rest being used cars. In addition, according to the agency, individuals mainly import used cars, while legal entities import new ones. Gradually, natural persons are importing more and more cars from abroad. For example, if in February of this year they imported only 2% of the total volume of new passenger cars imported, then in July this figure was 20%. Moreover, we are talking not only about the import of finished cars, but also of spare parts and components, which will solve the problem of maintenance and repair of used cars, including brands that have left the country.
Resolution No. 1269 “On Amendments to the Rules for Implementing Mandatory Requirements for Individual Wheeled Vehicles and Assessing Their Conformity” will also facilitate the situation. It changed the procedure for importing cars by citizens and organizations from abroad. In particular, legal persons can carry out the necessary certification in a simplified manner without obtaining permission from the copyright holder. Requirements for the technical equipment of cars are also simplified for legal entities, they can be imported without ERA-GLONASS devices until October 1, 2022, and for individuals — until February 1, 2023.
In Tatarstan, the rate of decline in sales will be less
Demand stimulation programs are of great importance. Since July, the Ministry of Industry and Trade of Russia has implemented two preferential car loan programs: “First Car” and “Family Car”. A number of categories of citizens within the framework of these programs can receive a reduction of 10% to 25% on the first installment when buying a new Russian-made car worth up to 1, 5 million rubles. The following preferential leasing programs have also been launched: “Affordable Rent”, “Russian Tractor”, “Own Business”, “Russian Farmer”.
We can name other measures to support the automobile industry. Just a few days ago, the Ministry of Industry and Trade of the Russian Federation prepared a draft law on amending the Federal Law “On Industrial Policy of the Russian Federation” regarding the regulation of contracts special investments. The draft proposes to extend SPICs (Special Investment Contract) in the automotive industry for the period until December 31, 2033, which will increase their attractiveness to investors, increase the stability of the conditions for the implementation of such contracts.
The automotive industry can develop in the republic, mainly due to a developed economy. Many machine-building enterprises in the region can start producing the necessary parts and assemblies for cars under import substitution, which will solve the problem of maintaining the existing car fleet. It is possible that enterprises of other industries located in the republic will also begin to produce spare parts for cars.
As for the auto trade in the republic, it will remain, but, most likely, mergers and acquisitions of dealerships can be expected, since it is mainly the big players that will survive. In the coming months, companies will probably trade in used cars, but the number of sales of new cars will gradually increase, mainly from brands that did not exist in the republic at all or whose sales volume was minimal.
The author’s opinion may not coincide with the position of the editorial board of Realnoe Vremya.