The Russian car market will grow by about a quarter in 2011 supported by government funds and economic recovery, analysts say.
The market soared 77% in the first two months of 2011, the Association of European Businesses said.
"The very encouraging start to 2011 continues with an 80% growth for the month [February] following January's 72% increase," AEB Chairman David Thomas said in a recent statement.
"The key components for continued growth remain in place. Our consensus view on 2011 remains at 2.24 million passenger cars and LCVs but in the light of the strong start to the year we will review this following March and first quarter results."
Vladimir Bespalov, an analyst with VTB Capital, forecasts a 20-25% rise to some 2.2 million vehicles.
"The market will continue growing as consumer demand strengthens in line with the country's recovering economy, lower car loan interest rates and several state-backed incentive measures, including utilization certificates and measures to finance auto lending," TKB Capital analyst Artyom Lavrishchev said. He said he expects the market to grow 20% to 2.3 million cars.
Before the 2009 crisis, the Russian car market was Europe's second largest with sales of 2.9 million cars compared to Germany's 3 million cars. Just as Russian sales were reaching German levels, the international financial crisis cut them by nearly half to 1.5 million, while government support measures boosted German sales to 3.8 million.
In March 2010, Russia launched a “cash-for-clunkers” program, which allows car owners to trade in cars that are more than 10 years old for a 50,000 ruble ($1,746) state certificate to buy a new Russian-made car. The program, which has boosted annual sales by a third, is to be completed this year.
The government also offered subsidies to banks to slash interest rates on car loans, which dropped to 13-16% this year, below pre-crisis levels of 15-16%.
"My estimates show sales on the Russian car market may slow insignificantly in the middle of the year but will be replaced with moderate growth in line with the gradual introduction of foreign car assembly lines at Russian facilities," said Maxim Lobada, an analyst with Investcafe.
The government has also taken measures to attract foreign car makers by cutting import duties on car parts for companies that build car plants with a production capacity of at least 300,000 cars a year.
Lobada forecast most sales growth in the low and medium cost segment. Demand for premium class cars is usually less dependent on the economic environment.
Lavrishchev said the AvtoVAZ car giant, which received billions of rubles in state support during the crisis, was likely to increase production by 28% this year to achieve the pre-crisis revenue level of 180 billion rubles ($6.3 billion.) It plans to do this by replacing its classic Zhiguli models, copied from Fiat cars produced in the 1960s, with Lada Granta.
The Granta will sell for 220,000 rubles ($7,200), and could be sold outside Russia.
"The general trend will be a shift from low-end to mid-end cars, but it will be a trend for 2012-2013," Lobada said.
In the longer term, the Russian market will continue to grow on low ownership. According to Bespalov, Russian car ownership amounts to 240 cars per 1,000 adults in Russia compared to 300-400 cars in Eastern Europe and 400-500 in Western Europe.
MOSCOW, March 17 (RIA Novosti, Nikita Likov)
