Prospects of car utilizarion in Russia

Tatyana Arabadji,
director of Russian Automotive Market Research

An issue concerning introduction of premiums for utilization of cars as means of sales stimulation has been much discussed lately.

From our point of view, a premium for utilization of an old car will not result in significant sales increase in Russia.

The sum of compensation for utilization discussed amounts to 50-60 thous. roubles.

Owners of 11-year-old BMW, AUDI and other vehicles which can be sold at better will not apply to this program.

A greater part of owners of old cars priced at 50-60 thous. roubles present a group of unprivileged citizens. As a rule, their savings are enough to make an additional payment of 30-50 thous. roubles when changing an old car for a newer one.

And if an owner wants to get a premium for a utilized car, he should buy an absolutely new vehicle instead of the old one.

The cheapest Lada 2105 or Lada 2107 vehicles are priced at 160-170 000 roubles.

Therefore, an owner should make an additional payment of at least 100 000 roubles, which can turn out an unreal sum. As the said group of car owners do not always have the required money or they are not ready to spend such money under the crisis conditions, when unemployment rate increases and incomes decrease. Besides, it is not easy for this group of citizens to receive a car credit of 100 000 roubles. As a rule, their official incomes are rather low, requirements on the initial installment, insurance payment etc. will be difficult to meet for them.

Of course, there is still a group of car owners with stable incomes, having an old car priced at 50-60 thous. roubles as the second or even the third vehicle. This group of car owners will be able to make use of the program. But, in our opinion, it is not reliable to count on a significant number of sales due to this program.

An indirect proof of it is the fact that there were no many people wishing to purchase a car on the state program with subsidization of the rate of interest in its first version when it was possible to buy a car priced at up to 350 000 rubles. By market members’ estimates consumers with rather high incomes, for whom it was possible to buy a more expensive vehicle configuration got interested in the program. Therefore, buyers with lower incomes did not hurry to spend money on a car.

At the same time, introduction of a premium for utilization of an old vehicle could increase sales of commercial vehicles, especially in the LCV and LDT segments. In this case automotive vehicles are necessary means for business survival. This group of consumers will have to change vehicles though not in the previous amount.

It is interesting that in Nizhny Novgorod region a resolution was signed on August 11 according to which natural persons can receive compensation changing cars produced before January 1, 2003 for the 2009 vehicles, manufactured in the territory of the region. Compensation payout ratio amounts to 10% of a new vehicle cost as of the date of the sale and purchase agreement, but it should not exceed 50 thous. roubles. Primarily, it will support realization of GAZelles, manufactured by Gorky Automotive Plant. Considering the fact that the GAZ Group introduced an inexpensive version of GAZelle, priced at 264 000 roubles, increase in sales of the said vehicles in the territory of Nizhny Novgorod region is rather possible.