July 31, 2013, 00:00

Foreign cars will pull out the auto industry

Car production in Russia will continue to decline, predicts ASM Holding and market participants themselves. Foreign cars will be in increased demand among consumers - their production will increase, unlike domestic cars Vladimir Shtanov Car production in Russia will be supported by foreign cars / A. Makhonin / Vedomosti

Car production in Russia will decrease in 2013, ASM Holding predicts (see chart). Moreover, fewer domestic cars will be produced, but the production of foreign cars - cars, trucks and buses, on the contrary, will increase by 1.5, 0.2 and 8.9%, respectively. The market has been shrinking since March: in the first half of the year, sales fell by 9.7%, production by 3.5%, according to ASM Holding.

Automakers have similar forecasts. For example, AvtoVAZ may reduce Lada sales and production by about 10% this year, it reported in June. However, the reduction may be smaller due to the resumption of the preferential car loan program from July 1. Therefore, PwC has improved its forecast for the Russian passenger car market: in 2013 the decline will be 1.5-3% to 2.7 million units. instead of 6%. The GAZ Group plans to maintain its market share in 2013 (47.5% in the segment of light commercial vehicles, LCV, Autostat data), and production will depend on the market situation, says a company representative. Kamaz plans to maintain truck production at the 2012 level - 45,500 vehicles and sets, its representative said. The production of buses may increase due to the fact that the state supports the purchase of gas-fuelled equipment by municipalities, he noted, but did not give figures. Sollers expects to produce about 34,000 SsangYong cars (+4%) and about 70,000 LCVs and UAZ SUVs (-0.3%), a company representative said.

Manufacturers of foreign cars are more optimistic. For example, Avtoframos (owned by Renault) in 2013 can increase production by about 7% to 180,000 units. per year, his representative previously reported. The Hyundai Motor Manufacturing Plant plans to maintain production at 220,000 Hyundai and Kia vehicles. The production of Volkswagen cars in Russia may increase by about 10% and exceed 200,000 units, as previously reported.

Thanks to foreign cars, the overall production of cars in the country may even increase, says VTB Capital analyst Vladimir Bespalov. The process of import substitution continues while increasing the capacity of automobile plants, as provided for in agreements on industrial assembly, he explains. The low base effect of the second half of 2012 will also have an impact, when factories adjusted car production due to a slowdown in sales, Bespalov recalls. Production will follow the market, enterprises have learned not to work at the warehouse, notes Deputy Minister of Industry and Trade Alexey Rakhmanov. We will not produce more cars than we can sell, confirms an AvtoVAZ representative.

There are no plans to use new instruments of state support for the automotive industry, Rakhmanov said. Short-term incentive measures (recycling schemes or preferential lending terms) usually steal a significant percentage of demand over the next few years, so mechanisms aimed at maintaining long-term competitiveness are preferable, warns Stefan Mauerer, director of the BCG Moscow office.

According to Bespalov, the decrease in production will not have a negative impact on domestic players, since their debt burden is low. For example, Kamaz and Sollers have a net debt to EBITDA ratio of only 1, he notes. The load at AvtoVAZ and GAZ is higher - 3.7 and 3.2, respectively, but the situation will improve as new projects are implemented and sales of new models increase, Bespalov explains. In addition, the state subsidizes most of the interest rates on loans, and the multibillion-dollar loans issued to AvtoVAZ by Rostec are interest-free, their repayment terms have been extended until 2032, the interlocutor recalls. The change in production volumes will not affect the fulfillment of obligations, the AvtoVAZ representative emphasizes. Kamaz's debt burden is decreasing and there are no problems with payments, a company representative notes. Even if production is reduced, this will not affect loan servicing, since the company can flexibly manage production costs, says a representative of the GAZ group.