The panorama of Russian LCV market

The panorama of Russian LCV market

Expert.Ru – The Russian light commercial vehicles (LCV) market is on the decline. However, the shrinkage in LCV segment is not as sharp as in other types of commercial vehicles. The experts relate this situation to the increasing role played by LCVs in logistics chains of transportation companies.

Medium and heavy tonnage commercial vehicle sales have declined by 20% in Russia in 2013, in comparison with the previous year. The shrinkage continued at a rate between 15%-18%, during the first quarter of 2014. A year-end shrinkage rate of 20%-30% is expected generally.

The LCV market seems to be less affected by the crisis. In 2013, the sales have declined by 5.7% only. The shrinkage rate for the first quarter of the year is between 6%-8%. The year-end shrinkage rate is being predicted as 10%-15%. However sharp it may seem, this is a more optimistic prediction, in comparison with the medium and heavy tonnage commercial vehicle segments.

The usage of LCVs in Russian transport has been on the rise recently. The logistics operators opt for LCVs in big cities, where mobility problems are experienced.

The increasing popularity of online shopping in Russia and the growing necessity to transport goods in smaller parcels are other factors, increasing the demand for LCVs in logistics sector. A close relationship exists, especially between the electronic appliances market and the LCV usage. The sectoral experts draw attention to the serious progress made in the delivery of goods purchased from online stores, during the last two years.

In contrast with other segments, the LCV market is still dominated by Russian brands. 55% of sales have been made by GAZ and UAZ in 2013. During the same period, the market shares of Ford and Volkswagen were 7.6% and 6.3%, respectively. On the other hand, it should be taken into account that while the sales of GAZ and UAZ were on the decline (-5% and -10%), the sales of foreign brands maintained a steady upward trend: Ford +10%, VW +11%, Renault +20%, Iveco +30%, Mercedes +30%.

There’s a direct proportion between the amount of budget allocated for LCV purchases and the preference of foreign brands. In small and medium scale investments, on the other hand, where the amortisation period is shorter, the Russian brands are preferred, considering their ability to offer their model ranges 1.5 to 2.5 times cheaper than foreign brands.

Will the Russian brands be able to maintain their dominant position in the market? When will the shrinkage end in LCV sales? These are some of the questions the manufacturers and dealers are trying to find answers at the moment.

The analysts from Avtostat share the view that factors such as: the uncertainty, the unstable position of the Russian economy, the precautions taken by the Central Bank concerning the banking system, the depreciation of ruble and the decline in petrol prices; will have negative effects on the LCV market. The possibility of escalation in Ukrainian crisis and the speeding up of the recession process in Russian economy as a result, may potentially be added to the factors above.

However, the majority of the players in the market are trying to make strategies in accordance with the most optimistic scenario. This scenario suggests that the market will shrink by 10%-15% this year and the recovery process will start in 2015. The market will catch up with its previous levels somewhere in between 2016-2017.

The Russian brands possess several advantages not only to maintain their market shares, but also to push their sales figures to upper levels. The depreciation of ruble, which has a negative effect on the sales of foreign brands, being the main one. In addition, the Russian brands are trying to modernise their production and renew their model ranges, in order to increase their competitiveness.

Lada Largus, which was launched to the LCV market by AvtoVAZ this year, has to be mentioned at this point. 5953 of this model have been sold in 2013 (+670%). The experts are of the opinion that there is a great sales potential for Largus in future, which is currently the ninth most popular LCV. The vehicle, which was designed on Renault-Nissan partnership’s Bo Platform, is 50% cheaper, in comparison with the foreign brands in the same segment.