Events unfolding in Ukraine following Russia’s annexation of Crimea will have a significant impact on Russia’s auto sector, says LMC Automotive. According to the global forecasting firm, Russian new car sales came in at just under 2.6 million units in 2013, a decline of 5.5 per cent compared to 2012. This year started slightly better than expected but the perceived deterioration in the economy is likely to see Russian consumers rush to buy cars to beat significant price increase later. In spite of the expansion in Russian car production in recent years, the share of imported cars increased to 36 per cent in 2013. A further 46 per cent of sales were accounted for by producers building foreign-branded cars in Russian plants.

Domestic producers will benefit from the currency depreciation by becoming more competitive. Russian sales for the largest producer, AvtoVAZ, fell by 19 per cent in the first two months of 2014. However, as its cars feature a low proportion of imported components, the brand may be able to claw back some lost market share soon. Hopes that Russia might overtake Germany in 2014 have long since evaporated and the latest cut to the LMC forecast means that the timetable for Russia to become Europe’s largest car market has already slipped to the end of the decade at best.

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