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There may be a bright side to Russia’s gloom 

Published: Fri, 19 Dec 2014 13:35:14 GMT

Rolls-Royce Moscow Russia bespoke
Rolls-Royce Moscow bespoke collection car

Open quote signSpare a thought for carmakers and suppliers who invested vast sums in Putin’s backyard in the belief that one day Russia will be Europe’s last big growth market, capable of replacing Germany as the region’s biggest car market. 

Fast forward. Almost unimaginable, today’s Russia looks a mere pale shadow of its former self. Well before the current turmoil, Russia’s car market was already on a downward path. 

To date new car sales have fallen in 22 out of the past 23 months. 

But that backdrop compared to very recent developments almost looks mild.

Western sanctions, the free fall of the rouble - more than halving in value since the beginning of this year - and the price of oil that is now heading towards lows barely conceivable a year ago, have brought Russia to its knees. In light of very recent events, the debate now is how much weaker the rouble can become. 

If media reports are anything to go by, Russia’s consumers, far from shedding tears, are now entering up-market shops in droves in order to snap up high-ticket imported consumer items before the inevitable steep price hikes sparked by the rouble's massive devaluation.

Meanwhile, this November Russia’s car sales eased back just 2.3 per cent.

Perplexing in light of recent developments, that’s the far and away smallest contraction seen so far this year. 

Put into context with the sharp falls seen earlier this year, it suggests that today’s intensifying Russian economic upheaval does not hold the terror for Russia’s consumers that the 1998 crisis did, right? 


There is no way of knowing, but the miraculous improvements seen in Russia’s car market during the past couple of months is probably due to the cunning nature of Russia’s consumers who are well versed to cope with the all too familiar sudden shortages under Soviet state rule. 

Buy while you still can, before at best prices go through the roof. 

The average Russian, wary of the inevitable impact from Western sanctions probably did anticipate the free fall of their currency, if not quite in the way it has materialised. 

Still deeply ingrained in Russian minds, we could be in for a previously unexpected and seemingly illogical development in Russia’s otherwise recessionary car market. 

Far from acting in familiar western manner at times of severe economic hardship, and clearly unwilling to see their savings watered down on a daily basis, it seems that Russia’s cash society will readily exchange alarmingly weakening roubles for shiny new western cars prior to the steep price hikes certain to wait just around the corner. 

This in the likely belief that these will retain their value a great deal longer than the untaxed roubles kept tucked under mattresses. 

Far fetched? 

Perhaps. But that mentality could conceivably explain the paradox of far higher than earlier anticipated new car sales at what now ranks as a sudden meltdown of Russia’s economy, topped by spiralling interest rates. 

So despite the deep and cold Russian economic winter ahead, in the very short term, if new car sales volumes rather than fast disappearing unit profits are a guide, for some of Russia’s cash customers there could be a generally brief and unexpected brighter side to Russia’s gloom. 

At the same time, though, the same certainly cannot be said for most profit-driven Western carmakers
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