Russia's automobile market is expanding in both physical and monetary terms. Russians want to buy more and more expensive cars, to the joy of foreign producers
Togliatti-based Avtostat agency has published a report on Russia's automobile market in 2007. Weighted average price of a car comprised about 19,200 dollars (compared to 16,550 dollars in 2006). Experts predict that at the end of 2008, it may rise to up to 22,000 dollars.
The share of cars in the biggest - 10 to 20 thousand dollar - price segment comprised 43.9 percent of the market (with a total of 1,055 mln. cars sold). Only five years ago, cars in this segment comprised only 8 percent of total sales.
Back in 2002, the cheapest cars segment (below 10,000 dollars), including Russian-produced cars, constituted 85 percent, with only 26 percent in 2007. So there is nothing unusual in the fact that AvtoVAZ and other domestic producers are reducing their market shares. More and more Russians prefer the more prestigious, comfortable and expensive foreign brand cars.
This trend finds support both in the tradition of 'worshiping' imported vehicles, and the rapid development of car credit industry. The latter tendency now allows many middle-class Russians to buy cars like Ford Focus, Nissan Almera, Mitsubishi Lancer, Toyota Corolla, etc.
Car market has also shown growth in the more expensive segments, with vehicles costing 30 to 40 and 40 to 50 thousand dollars doubling. Almost 20 percent of all car sales turnout in Russia comes from 50,000+ cars.
What was happening to car producers in 2007 in terms of model lines development and strategic marketing? We can clearly see that Russian-brand cars are growing in price. Even AvtoVAZ, whose President Boris Alyoshin swears to keep the plant's fame as the maker of 'people's cars', is having problems with making a car that would be cheaper than 10,000 dollars.
GAZ's new project - GAZ Siber, a car based on Chrysler Sebring, is promised to enter the market already this year. But the new automobile will cost a minimum of 18,000 dollars.
UAZ is also raising prices of its products. Its 'flagship' - UAZ Patriot is sold at 16,900 to 20,000 dollars.
At the same time, international car makers who open their production facilities in Russia, like GM, Nissan, Renault and Toyota, report their plans to create 'affordable' cars that would cost less than 10,000 dollars. Some even promise to present a car costing only 3 to 5 thousand. These projects are aimed at developing countries, including Russia. And we must not forget China, where almost 9 mln. cars were made in 2007. Chinese export is also aimed, among others, at Russia.
Avtostat's analysts believe Western producers pursue strategic goals when entering the 'affordable' segment - sales of these vehicles bring minimal earnings.
Anyway, car manufacturers of the Volga region are in an uneasy position. Playing in the 'less than 10,000' segment is getting more and more unprofitable and complicated technically, while entering the 10 to 20 thousand segment is still risky. It will be hard for AvtoVAZ to win the competitive battle against Western and Japanese brands. And nobody yet has a plan that would help Russia's car industry to overcome the situation and not to be pushed out by foreign brands.
Photo: SXC
Denis Kvasov
http://eng.expert.ru
