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Car again will be affordable only to the rich

Автомобиль снова станет по карману только богачам

Auto industry in Russia is close to the crisis and in the conditions of state regulation of the output of two increase in real income or support.

In 2013 the production of cars in Russia for three years fell by 42%. Then began a gradual increase, and in 2018 the gap with pre-crisis times decreased to 16%. It seemed that positive dynamics have stabilized, but experts predict the possibility of future declines due to weakening consumer demand: real incomes of Russians continue to fall. Nervousness in the market added today’s news that the auto giant Ford this summer can completely abandon the import and release in Russia of cars, except for commercial.

Dmitry Kozhnev, an activist of the Interregional Union of workers Association (MPRA):

“The decline in the production of cars, possibly, will continue – because there is a drop in consumer demand. It, in turn, due to falling real wages and standard of living, which, no matter what anyone said, continues. On the other hand, if we talk about the automotive market, it is necessary to understand in which sectors there is a decline.

If we talk about Ford, that is a serious drop in sales, but not all, cars that produced in Russia. The joint venture Ford Sollers in Russia three plants in Vsevolozhsk, Elabuga and Naberezhnye Chelny. In particular, the crossovers and SUVs, and particularly for commercial vehicles, on the contrary, good growth. In Elabuga, for example, produced two quite popular SUV, the Ford Kuga and Ford Explorer, as well as commercial vehicles Ford Transit. On them no problems.

However, over the last few years at Ford, there are serious problems in Russia, because production capacity is not fully loaded. Big failure at the Focus, which is produced in Vsevolozhsk. Now consider, as far as I know, several options. They were to leave Russia will not be, but may close two plants in Vsevolozhsk and Naberezhnye Chelny. They are still also considering the option of converting the plant in Vsevolozhsk on the issue of some model crossover or SUV. Next – the Baltic States and Scandinavia. It may be possible to produce cars for this market, for sale outside.

Between the dark production was tied a lot of other suppliers. The destruction of these schemes will mean big problems, including for the management of regions.

In General, in Russia now there is a redistribution of the market between different players. The number of employees at the enterprises permanent change: I declare that it will recruit a new one, talking about cutbacks. For example, sales growth is now seen in South Korean automobile industry in a number of positions, while Peugeot Citroën – fall in the class of sedans. Plants that are on the territory of Russia, was designed for large production volumes.

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The future of the industry depends on how it will change the purchasing power of people. If we talk about cars, which belong to the expensive segment, then everything is fine. The reduction of solvency has the most mass category – regular workers.”

Timur Nigmatullin analyst “Discovery Broker”:

“There is a tendency to fall production. In January-February 2019 it has grown, but not significantly, earlier the rate was higher. Apparently, this is due not only to falling consumer demand: 2014, real disposable incomes fell by 12%. However, what is happening is due to the fact that the Central Bank raised its key interest rate, and this was reflected in the loans, including consumer spending and auto loans. Accordingly, the higher the rate, the more expensive the service, the less the demand for loans and less demand for credit cars. And this directly affected the industrial production in Russia.

From the point of view of the negative factor is the exchange rate, because it affects the cost of Russian production, and their ability to sell cars. If the cost of growing, to maintain profits producers have to raise prices, while higher prices means lower demand. But I think this factor is of less importance in comparison with the dynamics of real incomes and interest rates on loans.

Perhaps the sector will cope with the problems itself, if the improvement of General economic indicators. But the market is strongly influenced by state support. There are special programs that help family to buy the first car at a discount or to receive any other subsidies. If the volume of state support will be less, the smaller will be the demand and Vice versa – if they are bigger and wider on the number of recipients of such support, higher will be the demand. But then the question has rests on the expenditures of the state budget.”

Vasily Koltashov, head of the center for political and economic studies at the Institute for a new society:

“The situation on the market depends on the international and domestic economic processes. 2018 was good for the automotive market, although we did not come to the level of 2013 sales of cars. But at the end of last year, the economy saw negative processes associated with the fall in oil prices. Although it is now growing, but it is clear that global and domestic trends are changing.

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Last year’s acceleration in consumer demand was associated with the loan with active loans in large volumes, and now this wave has come to an end, and this has led to the decline in production and sales of cars.

The Russians still have them to cars, there is quite a strong request to the man in the car. If economy will grow, people will first buy cars and real estate.

Now the market situation is rather warns us about the possible reduction of sales in 2019. This is due to the low purchasing power of the population. In principle, for the industry out of the current situation, almost a crisis, is possible only if the increase real incomes, and government policy must be focused on it. Now it is not. Now government policy is not conducive to the growth of incomes and, accordingly, sales growth. The government has not yet committed to create many well-paid jobs or at least in due measure to increase salaries of state employees. The state does not give the economy signals that it will hire and increase wages.
And there is only one simple mechanism for changing negative processes is the cost of credit. It can lead to the persistence, even increase sales, if used again, if you lower the rates. But hardly this can happen even when the world market is going serious clouds.

On the other hand, there is a contradiction between the demands of the street and the need for urban renewal. The Russian car market is oversaturated. There is rather more potential for public transport than personal.

It is therefore possible that the industry needs to change the guidelines. But for this and the state should change its own orientation, because while transport policy modernizarea, Sovremennaya only in some major cities. In other cases it was done for motorists but not for passengers, and this creates traffic jams, fumes, etc. of a Russian city, in principle, approached the limit of growth of the fleet, and it is good, should be reduced. This does not mean that plants should be closed; but they must shift to the production of different type of vehicles, not personal.”

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