Every year the “real” cars in our country is getting smaller. In addition to the devaluation of the ruble is largely due to the Russian authorities, who are trying to prevent the auto import for the benefit of local producers. Can we reverse this trend the reduction of duties on foreign cars and the termination of the regime of industrial Assembly?
Everything goes according to plan
In the framework of its commitments to the world trade organization Russia since September, has once again lowered duties on new foreign cars. Recall, at the time of our country’s accession to the WTO in 2012, they accounted for 30% and since then gradually decreased. The target of 15% should be achieved within seven years, i.e. by 2019. With the main decrease in tariff rates scheduled for the last three years: from 23% to 20% in 2017, to 17% in 2018 and to 15% in 2019.
The intention of the Russian authorities, the competitive advantage of locally assembled cars was to allow foreign automakers to fully implement the investment projects on localization of production in our country. Moreover, the requirements of the WTO the preferential regime of industrial Assembly of cars and components in Russia is limited until mid-2018. However, we must note that the reduction of duties on foreign cars were made in the best Russian car market era, followed by the double collapse in demand and the devaluation of the ruble. Therefore, the recent adjustment of customs tariffs practically will not affect the position of the imported cars. At the very least, reduce their costs clearly can not be expected, and at best can only count on the fact that the price of imported cars will grow not so much. Indeed, apart from tariff regulation the pricing is more influenced by factors such as inflation, exchange rates and market dynamics, and he is now gone into growth.
As noted in the analytical center of the International automobile holding “Atlant-M”, the fee reduction is 3% by itself does not compensate for the sharp fluctuations of the ruble in the years 2014-2017. But if we consider the situation on a more short-term interval (in 2017, when the ruble and the situation on the market became significantly more stable), it may have some influence on relative competitiveness of certain models and brands.
“Currently, distributors, and dealers are already operating with extremely low margins. Even if some minimal benefit from the reduction in import duties and will appear, most likely, it will be used for the payment of current expenses. So the reduction in retail prices of imported cars to Russia should not expect”, — confirms the Director of the dealer centre “Avilon” Mercedes-Benz Oleg Shamba.
Quotas have lagged behind demand
Given that prices of imported cars lower will not, obviously, cars of local production will continue to remain more attractive to buyers. In this regard, automakers are in no hurry to increase imports to Russia at reduced fees. The baseline forecast of PwC, the supply of foreign cars in our country by the end of 2017 will be reduced by 14%, an optimistic scenario is not much better of 12% with a minus sign. And this despite the fact that the demand for the market as a whole is steadily recovering, and this year the sales of passenger cars may rise by 7-11%.
“The volume of imports will primarily be to influence the recovery of the market and the ruble, and the reduction of duties can stimulate growth, but to a lesser extent”, — says Director of PwC Russia Victoria Sinichkina.
According to analysts of “Atlant-M”, due to the nature of planning of production volumes, timing of production and logistics complexity in the automotive business volume of import vehicles rather slow rate. Import of 2017 is largely defined by production and sales plans, which was formed in the fall of 2016 at the rate of 65 rubles to the dollar and the deep drop in sales. The strengthening of the ruble in the current year and the fee reduction in the future should slightly change the balance of forces in the market and at least stop the reduction of imports.
Meanwhile, since the new year the government can by 15% to increase recycling, which will strike first of all on importers, because for local brands this tax, as we know, kompensiruet from the budget through industrial subsidies. Recall that the rates of car recycling fee increase is not the first time — in 2016, they grew by 65% in the government connected with the fall of the ruble. Once indexing is apparently due to reduction of duties on foreign cars, because recycling was originally conceived as a measure to protect the domestic industry from the influx of imported cars once the customs rates on them have started to fall under the country’s accession to the WTO. However, a new increase utilsbora, though laid in the draft budget for 2018 — the issue is not yet resolved, and may be less than 15% or not occur at all.
Says development Director of company “Rolf” Vladimir Miroshnikov, recycling compensate for budget losses from tariff reductions, as a measure for soft compulsion of manufacturers to start and expand localized production. In this regard, in the Russian market will continue the trend to gradual reduction of imports, excluding some segments of the premium and niche models, and the continued increase in the prices of imported cars.
The increase in the recycling fee will affect the price lists only import cars, agrees the General Director of “Autospeccentre KIA Capital” Alexey Potapov. However, in his opinion, next year the import will be able to play a crash caused by indexing utilsbora, as the addiction of consumers to new prices and assuming a stable exchange rate.
However, for buyers of foreign cars of mass, any increase in cost will be significant and will certainly affect their sales. But in the premium segment of the price increase due to the utilization fee can actually pass unnoticed. According to estimates Oleg Shamba, today the collection of the value of the car Mercedes-Benz is about 100-150 thousand rubles., and its increase may lead to higher retail prices for 10-20 thousand. “Most likely, the increase in the cost of the car will be adapted, as manufacturers and dealers will focus not only on increasing costs to be included in the cost of the car, but also on market conditions,” he said.
Toyota needs to be Japanese
Toyota Land Cruiser Prado now heads the ranking of the most imported into our country автомобилейToyota Land Cruiser Prado now heads the ranking of the most imported into our country car
It is significant that the largest share in the structure of import of cars today is exactly the premium cars, which account for about 55%, according to data of the Agency “AUTOSTAT”. Although a leader in supply still remains a Toyota, the other members of the top 5 importers are premium brands: Mercedes-Benz, Lexus, Audi and BMW. And the most popular import models are SUVs like Toyota Land Cruiser and Land Cruiser Prado, Lexus RX, Mercedes-Benz GLC and GLE-class and premium sedan Mercedes-Benz E-class, BMW 5-series, etc. at the same time the volume of sales they are significantly ahead of most of the imported models of mass brands.
Top 10 brands by volume of import
|Mark||Qty, PCs.||Rev. %||Share, %|
The data of the Agency “AUTOSTAT” for 8 months of 2017.
As explained by analysts of “Atlant-M” to localize production in Russia of premium-class vehicles are usually not very justified economically given the relatively modest production volumes, and the efficiency of the industry is very much dependent on economies of scale. However, the announced construction of a plant of the Mercedes-Benz shows that the substantial market share and market growth the project may not be recoverable. In fact, however, the absolute majority of premium cars not produced in Russia, and mass car of the local assemblies are not competing is a different segment of the market.
“In cars of premium class buyers Russia have always appreciated the quality of the original build and are therefore willing to pay a premium to the price of the car associated with the cost of its importation. Mass-market brands, in contrast, are evaluated by consumers primarily from the standpoint of economy. A wide range of foreign brands in Russia allows citizens to easily choose between localized brands, ignoring the mass of expensive imported cars,” — says Alexey Potapov.
Unlike the premium segment, mass market local Assembly provides a significant cost advantage over imported cars. It is not surprising that during the crisis in the automotive market, many of them could not compete and disappeared. Recall that after the collapse of the ruble in late 2014, the Russian market has left more than hundreds of models, most of which were imported. Today the most popular in Russia imported cars in the mass segment are models such as the Toyota Corolla, Subaru Forester, Suzuki Vitara, Ravon Nexia and R2, Kodiaq Skoda, Volkswagen Touareg and Nissan Juke.
The top 10 models in terms of imports
|Model||Qty, PCs.||Rev. %||Share, %|
|Toyota Land Cruiser Prado||8234||-1,8||6,1|
|Toyota Land Cruiser||4110||-47,9||3,1|
The data of the Agency “AUTOSTAT” for 8 months of 2017.
Says Oleg Shamba, the import of foreign cars of mass segment can be successful only if they are technologically (or sometimes, may be by design) superior to the locally produced direct rivals. Even if production costs abroad and in Russia make for equal, all the same logistics costs, speed of customer delivery, production flexibility, lack of bureaucracy in the form of customs, etc. handicap the locally produced models.
Most of the mass of cars imported from abroad are characterized by low sales (less than 5 thousand pieces) and a fairly low market share in their classrooms, noted in the “Atlant-M”. For example, Corolla sales are several times smaller than that of the leaders of the class Golf — Octavia, SIDA and Focus — all foreign cars assembled in Russia, which in itself speaks about the competitiveness of imported cars. However, the Toyota Corolla has sold in such large numbers (over 60 thousand in 2008, about 30 thousand annually in 2011-2014), that for her and now there are a sufficient number of adherents, despite rising prices. Also, the manufacturers don’t abandon the import of niche models with a large number of loyal owners (as, for example, Subaru), who do not want to change to another brand.
Went to the local
In General, however, mass brands, having power in our country, bet on the local Assembly. For example, Kia, occupying the leading places among the cars, recently completely refused to import cars, to organize in Russia the production model Picanto. The same principle had previously gone to Ford, Renault and Nissan, however, recently on the Russian market came back imported Koleos crossover and Juke. A small proportion of imports in sales volume are also of Volkswagen, Mazda and Skoda, and at the beginning of next year, the Czech brand localizes to the crossover Kodiaq, which is now imported.
According to analysts of “Atlant-M”, the local Assembly is the possibility of reducing the price and obtaining a market advantage due to the departure from import duties and utilization fee. In addition, it allows you to participate in the government programs stimulate the market. A minor share of imports for the leading players of the market is usually quite expensive models (such as Volkswagen Passat), which do not compete in price with cars of the Russian Assembly.
“Localization increases the potential of the model on the market and all the brands-leaders seek to organize the production of its most popular cars in Russia. Perhaps the production of some of the currently imported models that are in high demand, will also be localized, if the market recovery will continue,” — believes Vladimir Miroshnikov.
Import substitution in action
Meanwhile, in the current year has already recorded an absolute historical record on the share of cars of local production on the Russian market — more than 82%. For comparison, a year ago it was 80%, in 2012 — 64%, and in 2008 — 44% (the data of “AUTOSTAT”). According to experts, in the long run, the local machine can take up to 85-90% of all sales, despite the termination of the Assembly, and further reductions to 15%, and phasing out of programs to stimulate demand, under which import cars are not covered. With regard to imports, over the past five years they have decreased by almost 5 times, compared to the record for importers to 2008 — almost 10 times. According to PwC, the relative stabilization of oil prices and the ruble creates conditions for the growth of imports, which over the next 3-5 years may be commensurate with the dynamics of the total sales of passenger cars in the country. However, the achievement of pre-crisis share of market sales at the level of 30% is unlikely in the current regulatory environment.
“The expected reduction in fees is unlikely to pose a threat to local automakers, as may be imposed other barriers to restrict imports. Given the fact that the automotive industry has always been one of the priority sectors for the state, we expect to maintain policies to support localized brands, even after the completion of the industrial Assembly regime. A variety of brands, models and options, as well as the active marketing policy of manufacturers contribute to the need for imports declined. In addition, taking into account the devaluation of the ruble, the attractiveness of the vehicles of local production has increased even more. The high share of imports in total sales continues until only the premium segment” — sums up Victoria Sinichkina.
Photo: DepositPhotos and Toyota
What will happen to prices on imported cars after a decline posline prices on imported cars after reduction of fees