Car Brands Suspend Sales In Russia As Ruble Collapses


Moscow, Russia

Moscow, Russia

Like China or India, analysts often describe Russia as en emerging car market, where a relatively new middle class is expected to drive up car sales to levels comparable to those in more established markets. However, those optimistic forecasts are being put on hold by the collapse of the ruble. In response to a 40 percent drop in the value of the ruble since June, several automakers have suspended sales in Russia, according to Bloomberg.

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Amid Russia's worst economic crisis since 1998, customers are snapping up cars to convert their savings into something more tangible. Yet the temporary boon in sales is a problem for automakers because the currency's lack of value is eating into what they get for the vehicles.

Both Audi and General Motors Company [NYSE:GM]—which sells Cadillac, Chevrolet, and Opel models in Russia—suspended sales December 16. GM will deliver cars already purchased, while Audi is in the midst of setting a new price list to account for the ruble's loss of value.

Jaguar Land Rover also reportedly suspended sales, while BMW is shifting inventory to more favorable markets. While it has no plans to suspend sales at the moment, Toyota is planning to implement price increases.

"It's a bloodbath for everyone" Renault Nissan CEO Carlos Ghosn told reporters in Japan Friday, according to Automotive News (subscription required). He said every automaker is currently losing money in Russia.

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Yet Ghosn believes the market will stabilize eventually, and no company has talked of leaving Russia permanently. Nissan just started production of the X-Trail at a plant in St. Petersburg and plans to add the Qashqai next year. Audi parent Volkswagen plans to expand operations at its plant in Kaluga as well.

Russia has become an important market for automakers. In 2012 sales surged to 2.9 million, making Russia Europe's second largest car market, behind Germany. Low taxes have also enticed foreign automakers to build vehicles there. However, the market is also volatile. Sales this year were down 12 percent through November, to 2.2 million.

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