October 22, 2017, 23:57 / Auto

Cancellation of state support programs for buyers of new cars will slow down market growth

Without them, car sales could fall again next year Anastasia Ivanova

Car sales will stall without government support / E. Razumny / Vedomosti

The growth in sales of new cars may decrease significantly due to the cancellation of targeted state support programs “Family car” and “First car”. The president of the Russian Association of Automobile Dealers, Oleg Moseev, told Vedomosti about this. Four managers from different dealerships expressed similar concerns.

On October 18, the Ministry of Industry and Trade announced the early completion of targeted state support programs, as sales for them reached the target of 58,000 cars. Initially, 3.75 billion rubles were allocated for them. Now credit institutions are completing the issuance of loans, a ministry representative noted.

Previously, he explained that the possibility of increasing funding for programs in 2017 is currently being discussed, but did not disclose the amount under consideration. Targeted programs are planned to continue in 2018, including “First Car”, “Family Car”, “Russian Tractor”, “Own Business”. The representative of the Ministry of Industry and Trade did not say when they will be launched. But the main measure to stimulate demand for cars - bonuses when turning over an old car to a dealer in exchange for a new one - will be phased out in 2018. RUB 17.5 billion were allocated for it this year.

Now every second new car is sold on credit, and most of these loans are under government support programs, notes Moseev. The share of credit sales from car dealers has increased significantly in recent years. Thus, from 2015 to 2017, the share of sales on credit increased from 33 to 51% at Rolf, from 34.5 to 50% at Avtomir, from 34 to 47% at Avtospetstsentr, their representatives said .

Over the nine months of 2017, sales of new passenger cars and light commercial vehicles, according to the Automotive Business Association (AEB), increased by 10.6%.

The market has been growing since March 2017, and has been growing at double-digit rates since May. But due to the early cancellation of state programs, the sales growth rate in 2017 may significantly decrease to about 5%, says Vladimir Popov, president of Favorit Motors. In the worst case, the market may remain at last year's level, believes the manager of one car dealer. The Ministry of Industry and Trade does not agree with such conclusions. Despite the cancellation of targeted programs, the ministry forecasts growth this year of 7–10%.

The market is recovering mainly due to mass-produced cars: they are the best-selling ones, and their sales are growing the fastest. For example, from January to September, sales of Kia cars increased by 27% to 135,223 cars. According to this indicator, the automaker ranks 2nd among automakers, according to AEB data. 42,000 cars were sold on credit, of which 83% were sold under government support programs, a Kia representative said. Since 2015, the share of sales on credit has increased from approximately 26 to 31%, as follows from the manufacturer’s data.

The auto industry will not be left without government support

Auto / Automotive industry

The cancellation of the vehicle fleet renewal program will further aggravate the situation on the market next year, Popov continues. If other sources of stimulating demand do not appear in 2018, then the market, at best, will remain at the 2017 level, and at worst, it will begin to fall, he believes. The beginning of the year is always difficult for the market, agrees the manager of one car dealer: even despite the low base of last year, the market may fall.

People may begin to either postpone purchasing again until new programs are introduced, or refuse to buy a new car in favor of a used one, Moseev believes. Manufacturers, of course, will introduce their own recycling programs, but their capabilities are incomparable to what the state can do, Moseev is sure.