The number of auto galleries has fallen by 7% in a year in Russia

The number of auto galleries has fallen by 7% in a year in Russia

Vedomosti – The total number of dealers has fallen by 7% in 2015, to 4159, as estimated by Auto Business Review magazine. 75 companies have stopped operations completely. Nearly 200 dealers have stopped selling cars, continuing business as service providers. This applies to Opel and Chevrolet dealers, in particular. Some premium brands, such as: Mercedes, Audi, Lexus and Infiniti have increased the number of dealers on the contrary, according to Auto Business Review.

The president of the Association of Russian Car Dealers: Vladimir Mozhenkov has given the number of dealers gone out of business as 200-250. The remaining dealers have an annual sales capacity of 3 million vehicles at least, he added. Meanwhile, as published by the Association of European Businesses (AEB), car sales have fallen for a third consecutive year. The sales collapsed by 35% in 2015, to 1.6 million vehicles. The drop rate reached 45% at the end of the 2013-2015 period. AEB expects the market to shrink this year as well, however not so dramatically, only by 4.7%.

Some centres have shifted to other brands, some began servicing automobiles and selling second hand vehicles, while others switched to different business, to cover the losses from auto trade, states Mozhenkov. The share of used car sales within the total structure has reached 30% in January, up from 10% in 2015, says a senior manager from one of the regional dealers. Combination of different brands in a centre, excluding others, is another scheme used by dealers, as told by Mozhenkov. Mozhenkov states that this applies to brands, the sales of which fell by over 50% (Peugeot, Citroen, Chery, SsangYong etc., according to AEB data).

According to Autostat analysts the dealer numbers will continue shrinking in 2016, however not as badly as in 2015. The dealers will switch to after-sales services and selling second hand automobiles. The dealers of brands with the sharpest decline rates in sales and single brand centres will be the only ones remaining in the risk zone.

The three consecutive years of decline has gradually taken its toll on the dealer networks, say the analysts from VTB Kapital. They share the opinion that as long as investment is made in the establishment of new centres and the dealers keep their hopes on market recovery alive, a mass market shrinkage will not be on the cards. In case of continuation of market decline, consolidation of dealer networks can be expected, since such high number of centres will not be necessary. In the meantime, the dealers are taking measures to optimise their businesses: reduction of staff, discount negotiations with car manufacturers and subsidies.