Russian car market has shrunk into two segments

Russian car market has shrunk into two segments – Russian car market has shrunk into two segments. Manufacturers continue to reduce their product ranges, keeping only the most popular models. Budget B-class automobiles and crossovers are currently the most demanded vehicles.

There were 500 models in the Russian market only a couple of years ago, now only 300, as stated recently during the press conference of Russian Car Dealers Union. The models with poor sales performance are leaving the market.

Vedomosti reminds the fact that 16 models have been taken off the production lines between March and June only. Mitsubishi Lancer and ASX, Nissan Teana and Juke, Renault Fluence, two Geely models, Suzuki SX4 and SX4 classic are amongst the discontinued models.

Car manufacturers withdraw the least selling models from the market, in order to avoid logistics and certification expenditures. Only GLONASS certification costs an average amount of $2 million per model. It makes sense to spend the money if the model is popular, however, the sales may not cover the cost of investment in niche models.

During the relatively good years, the niche models complemented the sales, however, they are a burden now, causing extra costs only.

As a result of this optimisation, having an effect on demand, the customers who are interested in compact cars or even class-A automobiles, as well as compact vans or minivans, may experience problems with choice. The pre-crisis approximate choice of 10 models in the A-segment has fallen to five at the moment: Ravon R2 and Matiz, KIA Picanto, Lifan Smily and Smart. Chevrolet Spark, Suzuki Splash, Peugeot 107 and Citroen C1, Chery Kimo and Faw V2 have left the market. The 6% market share of A-segment vehicles in 2013 has fallen to only 0.3% in May 2016.

Toyota Alphard and Chrysler Grand are the only two models left in the full-size minivan segment in Russia at the moment.

C-segment has experienced the sharpest shrinkage in market share during the last couple of years. The segment currently has just 7% share of the new automobiles market, down from eight years ago, when every fourth car sold in Russia belonged to Golf-class, such as: Chevrolet Cruze, Opel Astra, Honda Civic.

Thus, the Russian market has narrowed down to two segments: B-class budget cars and SUV. Almost 80% of all car sales belong to these two segments currently. The product range can expand by the recovery of customer demand only.

However, such a recovery is not foreseen for the near future. The predictions of the dealers are extremely pessimistic at least. As forecasted by the Association of Russian Car Dealers, the annual sales figure for 2016 will not be more than 1.3-1.32 million units, which indicates an 18-19% year-on-year shrinkage. The prediction for 2017 is even more modest – 1.2 million vehicles.

122,633 vehicles have been sold in Russia in June, according to AEB Car Manufacturers Committee data. The sales have gone down by 12,5%. The customer demand has shifted towards vehicles with mileage, as stated by the dealers. Therefore, the second-hand car market has become a promising area for automobile traders.