Russian Car Market Off To The Races. Again

The fate of the car industry depends highly on the price of oil. Higher oil prices, lower car sales. Lower oil prices, higher cars sales. Everywhere but Russia.

Russia’s main export is energy. Oil and gas. When oil climbed, the Russians were rolling in money and bought cars like crazy. Then came 2008. Oil crashed. The market crashed. Russian oligarchs went bankrupt. The car market followed. Unit sales of passenger cars dropped 50 percent last year. The annual Moscow Motor Show was cancelled. Automakers were worried about their investments into the Russian market. The Russians tried to protect their industry, raised import tariffs. The market plummeted more. Now, all of this is ancient history.

The market and the auto show are back. Last Wednesday, the Moscow Motor Show opened its doors, and exhibitors are writing orders, . In July, Russians bought 48 percent more cars than in June. Automakers have regained confidence in Russia.

According to The Nikkei [sub], the Russian car market has a much greater growth potential than the U.S. and Europe. “Only 230 vehicles are owned by every 1,000 Russians, compared with some 700 in Europe and 900 in the U.S.” (The Nikkei numbers are a bit high.)

Japanese carmakers are coming back into the Russian market.

“You’ve got to fish where there are fish,” Mitsubishi Motors President Osamu Masuko said.

Demand is high for large four-wheel drive cars in Russia, where SUVs account for 20 percent of total car demand.

Luxury is also back from the dead. Bentley plans to market its “Mulsanne” model, priced from 450,000 euros (571,140 dollars), in the country. Despite the high sticker price, Bentley has already received so many preorders that customers now placing orders must wait for delivery until after early next year.