Russia to become Europe's largest automotive market

Russia is poised to overtake Germany this year to become Europe's largest automotive market by vehicles sold, auditor PricewaterhouseCoopers LLC said.

Photo: Russia to become Europe's largest automotive market

The surging price of oil has revitalized the country's economy, providing many Russians the means to buy foreign-made cars. Meanwhile, rising fuel costs have made car ownership more expensive in Europe and the U.S., where sales are stagnating.

Car sales in Russia rose 41% in the first half of 2008 to 1.65 million, with a total value of $33.8 billion, PwC said in a report, citing figures from the country's customs service and a trade group. The auditor said that the figure is larger than the number of new-car registrations in Germany, but that Russia's total includes used imported cars.

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"If the market growth remains at the same level in the second half of the year, sales in Russia will exceed sales in Germany," PwC said.

The auditor estimates that Russians will buy as many as 3.8 million new cars in 2008. Industry association VDA expects 3.2 million new cars to be sold in Germany this year.

Russia has become a priority market for major car makers in recent years. Volkswagen AG of Germany and PSA Peugeot-Citroën SA of France are the latest auto makers to open factories in Russia and to take advantage of tax exemptions on locally assembled cars.

Russia's emerging middle classes have been snapping up cars such as Ford Motor Co.'s Focus and Renault SA's Logan. Each model had sales of more than 30,000 vehicles since January.

Russians' rising spending power has let foreign car makers increase their sales at the expense of less costly Russian brands, such as the Lada, owned by OAO Avtovaz. That company, Russia's largest car maker by sales, sold a 25% stake to Renault for $1 billion last year.

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Russians bought 1.1 million foreign cars in the first half of the year, up 47% from a year earlier, according to the Association of European Businesses. In June, Russians bought 202,309 foreign vehicles, up 44% from a year earlier. The figures include the sales of foreign-branded cars produced in Russia. Of the top five best-selling models in the first half, three are locally produced.

Source: The Wall Street Journal