Experts revealed the intention of the Chinese car industry in Russia

Sales of new cars in Russia fell down, setting a new anti-record in April. Chinese manufacturers did not escape the fall, they raised prices for their models more than others, but now they are left with practically no competitors.

Chinese gambit

Last April was the worst month in the history of the Russian car market – sales of new cars fell by 79% to 32.7 thousand units, according to the data of the Association of European Businesses. This is even less than was realized in April 2020, when, due to the coronavirus epidemic, dealerships were closed almost throughout the country, and cars were sold mainly online.

It is indicative that all the players of the car market, without exception, turned out to be “in the deep red” – not only the brands that have suspended their activities in our country, but even the “Chinese” who continue deliveries to Russian dealers and introduce new models. Thus, automakers from the Celestial Empire showed a drop in sales, despite the fact that the market situation, it would seem, is developing just in their favor.

According to Roman Slutsky, General Director of Alarm Motors Group of Companies, Chinese brands entered April with the highest percentage increase in recommended retail prices among all manufacturers and gradually improved their offer over the course of the month, since the commercial conditions at the beginning of April did not allow closing deals against the background of existing in the warehouses of dealers of the remains of commercial vehicles of other brands.

In fact, Chinese automakers “helped” official dealers of other brands to sell their stocks at the highest possible price.

By the end of April, the leading Chinese brands, having accumulated about 7 thousand cars in their warehouses, significantly improved their offer and became noticeably more attractive to buyers. Dealers of other brands entered April with the understanding that they were on a long “dry ration” – they planned to slowly and expensively sell their inventory with little hope of any significant deliveries in the coming 4-6 months.

“The result here was disappointing – almost none of the dealers hit their targets in terms of sales volumes and / or per unit profitability of the transaction by the end of April. Either we are expensive, or we sell slowly and on reasonable terms. In sum, these factors led to the fact that dealers of Chinese brands missed about 5,000 cars sold (Haval, Geely, Chery), and dealers of all other brands missed their April sales plans of about 15,000 cars. cars, missed about 20 thousand cars to its potential,” states Roman Slutsky.

Prices back!

Photo: Mikhail Metzel / TASS

Meanwhile, after the March jump of “official” price tags by 35-45%, in April, many automakers stopped raising the cost of their models.

This was partly due to the noticeable strengthening of the ruble, which has been observed since the second half of March, but the main reason is the collapse in demand, due to inflated “prices” against the backdrop of falling real incomes of buyers. However, there is still no talk of a possible price reduction, since there are no shipments to dealers for most brands and it is not known when they will be resumed.

Alexei Makarov, Nizhegorodets Director for Development and Corporate Governance, says that at the moment most dealers sell cars at the recommended retail price. It is simply impossible to raise prices even higher, since they have already reached the maximum possible level at which cars are still ready to be bought.

In turn, Andrey Olkhovsky, General Director of Avtodom Group of Companies, notes that car prices are now not at all based on the ruble exchange rate – all cars have already been bought by dealers on the same terms at the price that was valid at the time of redemption. Now the issue of pricing policy is only the prerogative of dealers, each one relies on his financial plan and his business objectives. A price reduction due to the strengthening of the ruble is possible, but this is only relevant for models that are still being shipped to Russia and are renewable. These are Chinese brands and most likely Korean.

“There is a slight price reduction in early May, dealers are trying to find a market level at which demand will be sufficient. In the medium term, there will be no reduction in car prices. But in the horizon of 4-5 months, I think that there will be a decrease if there is support provided by the exchange rate of the national currency. Most likely, small deliveries of single copies of cars through individuals from abroad will begin, “says Andrey Olkhovsky.

Fall down and don’t budge

Photo: Maxim Bogodvid / RIA Novosti

Indeed, the government recently legalized the parallel importation of goods, mainly cars and spare parts, which can be brought into the country without the permission of the copyright holder.

We are talking about those automakers that have suspended the supply of their products to our country or even intend to leave the Russian market. However, to all appearances, this will not solve the problem of a total shortage, since the parallel import scheme will not make it possible to ensure supplies in industrial volumes. In addition, taking into account additional intermediary services, gray imports are unlikely to reduce the cost of cars compared to imports through official distributors, and even more so compared to local production, and more importantly, deprive buyers of the factory warranty.

At the same time, another reduction in the key rate to 14%, after which car loans become more affordable, should help improve purchasing power. However, the rates on them are still at a protective level, and banks maintain a tough policy towards potential borrowers, so there is no need to talk about a noticeable revival of demand with the help of car loans.

According to Roman Slutsky, the reduction of the key rate will obviously play its role – the share of credit sales is likely to increase from 20% to 30% on average. For Chinese brands, it may rise up to 50% due to the recently announced subsidized loan programs from distributors.

“In general, the volume of the Russian car market in 2022, taking into account almost 300 thousand new cars already sold in January-April, from my point of view, will reach 650 thousand at best. This figure is due to the remaining inventory of distributors and dealers, which are barely exceed one full month of sales last year (i.e. about 150 thousand cars), and the ability of the industry to fill the market with an additional volume of supply (AvtoVAZ, GAZ, UAZ, Chinese brands), which is unlikely to exceed 200 thousand units”, Roman Slutsky predicts.

Alexei Starikov, Deputy General Director for Sales of New Vehicles at Avilon AG, believes that the Russian automotive market is demonstrating negative dynamics due to the deficit remaining in all segments. The situation in the industry is still unstable: there is no understanding when local production will resume, deliveries of cars to dealers and logistics chains will improve. Warehouse stocks are declining every day, at the moment there are cars of all brands on the market, but, according to the expert, cars from stock are left for a period of 2 to 5 months, depending on the brand.

Leave a Reply