Wednesday, 26 November 2014

Russians set to buy more subcompacts

Russia will emerge as a top automotive market in Europe as consumers in the country are beginning to place emphasis on driving dynamics and are willing to pay more for advanced driveline technology features.     
Frost & Sullivan report claims government initiatives – such as subsidies, scrappage schemes, and customs duty exemptions for original equipment manufacturers (OEMs) that match localisation criteria – will further quicken growth in the Russian automotive industry. 

New analysis from Frost & Sullivan, Executive Outlook of Developments in the Russian Automotive Industry, finds that sale volumes for passenger and light commercial vehicles are projected to cross 3 million units by 2020. The subcompact segment will account for over 40 per cent of light vehicles sales in this period. 

“Customer preference for smaller, fuel-efficient cars will push the subcompact and crossover vehicle segment to grow the fastest,” says Frost & Sullivan Automotive and Transportation Consulting Analyst Anna Ozdelen. “Russian consumers also place higher importance on features related to powertrain and ride quality than those in the UK, France, and Germany,” she claims.

Further, low vehicle density and an aging fleet of cars in the country will add to the demand for new vehicles, while OEMs such as Renault-Nissan will penetrate further into the subcompact and SUVs segments.

The scrappage scheme introduced this year is boosting subcompact sales too. The low saturation levels in Russia compared with the UK, France, and Germany have helped with continued growth. 

However, this demand will be tempered by geopolitical tensions in Ukraine, sanctions imposed on Russia by other countries, a deteriorating economic situation undermining consumer confidence, and market saturation in big cities.

The author suggests vehicle manufacturers should turn their attention to small cities such as Nizhny Novgorod, Chelyabinsk, Rostov-on-Don and Kazan that will offer better opportunities. 

“Russia will also be a key market for in-vehicle infotainment and telematics systems,” notes Ozdelen. “Vendors can capitalise on consumers’ penchant for high quality and value packages to make inroads in the country’s automotive market.

Executive Outlook of Developments in the Russian Automotive Industry is a Market Insight that is part of the Automotive & Transportation Growth Partnership Service programme from Frost & Sullivan, see. Insight aims to understand the Russian automotive market and develop a market forecast. The study examines changing consumer preferences as the country navigates through political crises and an economic slowdown.  

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