Azernews.Az

By Bloomberg

Russian car sales fell 38 percent last month, more than estimated, as the economy contracts and inflation accelerates after last year’s ruble collapse.

Sales of new cars and light commercial vehicles dropped to 128,298 units in February from 206,526 a year earlier, the Association of European Businesses in Russia said Tuesday in a statement. That’s the biggest decline since 2009 and follows a 24 percent slump in January. The median estimate of seven economists surveyed by Bloomberg was a decrease of 28 percent.

Automakers in Russia are suffering after the ruble weakened 46 percent against the dollar last year, the world’s second- worst performance, and the economy slid to the brink of recession. Car manufacturers are offering discounts or slowing output to counter low demand, with consumers hurting from inflation at 16.7 percent in February, the fastest pace since 2002. The car market probably won’t rebound until 2019 or 2020, according to PricewaterhouseCoopers LLP.

“The market is entering a very difficult phase now, and February is only the beginning,” Joerg Schreiber, chairman of the group’s Automobile Manufacturers Committee, said in the statement. “Industry sentiment is the next few months will be extremely difficult and the market bottom has yet to be found.”

Gross domestic product will shrink 3 percent this year, as the price of oil, the country’s biggest export, languishes at six-year lows and U.S. and European sanctions drive away investment, according to government forecasts. Retail sales may fall 8.2 percent, while price growth may end the year at 12.2 percent.

Looming Recession

Russia’s currency has begun strengthening this year, gaining about 12 percent against the dollar in February, the world’s best performance. The currency weakened 1.4 percent to 61.27 rubles as of 3:15 p.m. in Moscow.

The looming recession has pushed automobile producers to slow output, offer deals or reduce prices after increasing them amid the worst ruble’s crisis since 1998. Last week Ford Motor Co. said it will discounts of as much as 23 percent, following smaller decreases from Renault SA, Daewoo Corp. and China’s Great Wall Motor Co.

Among manufacturers suspending output, Renault idled lines at its Moscow plant from Feb. 16 to March 6, while General Motors Co. plans a temporary halt from March 23 to May 15, according to the companies.

Car sales may contract 24 percent this year to 1.89 million units after declining 10 percent in 2014, according to Association of European Businesses estimated in January.

Producers that don’t see Russia as their key market may leave the country, according to PricewaterhouseCoopers. Volkswagen AG’s Seat unit stopped supplying cars to Russia as at the start of this year, according to the division’s local website.

To fight the decline, Russia’s government extended a used- car scrappage program in December and is discussing the resumption of an automobile lending program.