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B. The market – Long-term growth, but the double-digit rates are over
2014-05-13-RB-AUTO-Rusay, Russia is the world's 7th largest market in light vehicle sales and the 5th largest in truck sales
3.
What do major stakeholder groups need to do to make Russia a more attractive automotive location/become more successful? (Chapter D)
2014-05-13-RB-AUTO-Russian Market-F.pptx
© Roland Berger Strategy Consultants
2014-05-13-RB-AUTO-Russian Market-F.pptx
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A. Study background and objectives
2014-05-13-RB-AUTO-Russian Market-F.pptx
Source: Roland Berger analysis 2014-05-13-RB-AUTO-Russian Market-F.pptx 5
We focus on providing an objective view for 3 questions about Russia's automotive future
Russia at the crossroads
Russian Automotive Market Study 2014
May 2014
Management summary
> Russia has so far not lived up to observers' optimistic expectations; the majority of players are struggling with local sales and production. Current geopolitical and macroeconomic challenges add to the concerns > We believe Russia is still an attractive market – and while it must not be ignored, it should not be overestimated: – Short- and medium-term automotive sales will stagnate due to weak macroeconomic conditions and the current political situation – The next 2-3 years are going to be difficult – We expect the market to recover and grow in the long term, reaching approx. 3.3 m units in light vehicle sales by 2020 (<2% CAGR 2012-2020) – The earlier forecast of 4 m vehicles no longer realistic – There are significant risks to this long-term forecast, mainly due to the fragile macroeconomic and political situation, unclear market support and delayed modernization/diversification of the economy > The concerns about Russia as an automotive production location have increased further: – Advantages of local production vs. imports will diminish due to expiration of preferential terms for local manufacturers (decree 166), decrease in import duties and weak overall cost competitiveness – Even with subsidies for local manufacturers at the current level, the share of imports will grow – In most cases production of smaller-volume models (<25,000 units p.a.) no longer profitable by 2020 – Approx. 40% of foreign brand volume currently produced locally is at risk of being imported in the future – Risks of automotive deindustrialization and overcapacity will make the business model especially of contract manufacturers obsolete; less localization of suppliers and less local content endanger the entire industry > If actions are not taken very soon and in a coordinated way, the deindustrialization scenario will become reality, and require even higher investments with less ability to influence development at a later stage
> With this study, we aim to draft a scenario for Russia that takes into account the opportunities of the market as well as the current difficulties and potential risks
Sales in the top 10 global markets, 2013
Light vehicles [m units]
Rank 1 China
2 United States 3 Japan 4 Brazil 5 Germany 6 India 7 Russia 8 United Kingdom 9 France 10 Canada 4.5 15.7 13.1 0.6 5.2 3.0 0.6 3.6 2.8 0.4 3.2 2.6 0.5 3.0 2.6 0.2 2.8 2.3 0.3 2.5 1.8 0.3 1.4 1.7 0.3
1. 2.
How will the automotive market in Russia develop between now and 2020? (Chapter B) How important is local production in Russia for being successful, and what direction is automotive production industry taking? (Chapter C)
Source: Roland Berger analysis 2014-05-13-RB-AUTO-Russian Market-F.pptx 2
Contents
Page
A. Study background and objectives
B. The market – Long-term growth, but the double-digit rates are over C. The industry – Higher import shares increase the risk of deindustrialization D. The to do's – Top priorities in Russia for the coming years
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So far, Russia has not met the optimistic expectations outlined in multiple earlier studies
> A significant number of studies on the Russian automotive market and industry have been issued over the past few years, all with an optimistic view of the future > However, in our projects and discussions with major players, serious concerns and multiple difficulties were mentioned: – Decreasing sales and production volumes in the recent past – Continuous challenges faced by international OEMs in fulfilling the assembly/ localization obligations accompanied by unclear, frequently changing regulations – Slow transformation process of the industry, making Russia fall even further behind developed and other emerging markets – Weak macroeconomic development, and no clear vision of the country for a future path to prosperity – Current geopolitical issues (Crimea crisis), which further increase uncertainty