RUSIA : A HUGE EMERGING CAR MARKET ISOLATED FROM OIL CRISIS
High oil prices are causing pain for carmakers in America as people there are sacrificing their fancy for pick up trucks and sport-utility vehicles for more frugal small vehicles. In May 2008, General Motors announced a 30 percent fall in car sales, compared with a year earlier; Ford posted a 19 percent drop, and sales of its F-150 pick up fell behind Toyota’s Camry and Corolla for the first time. But far in Russia, the high oil price is powering expansion of the market rather than painful restructuring. Thanks to abundant natural resources, Russia has been witnessing a rising economy since decade ago. With nearly doubled and steadily rising real disposable income, cars are no longer unaffordable for many Russians.
Currently, car ownership in Russia is still low at about 200 per 1000 people, compared with the over 500 in most of Western Europe and the around 800 in American (even in other former communist countries in Central Europe, the number is between 300 and 350). But the car market there is expanding : in 2007 Russia's sales of new cars grew 36 percent by volume and 57 percent by value; sales of passenger vehicles exceeded 2.7 million. According to analysts, Russia could out strip Germany as Europe’s biggest market by 2008, with sales reaching around 3.3 million; by 2012 Russians will be buying more than 5 million new cars a year, of which nearly 90 percent will be foreign brands.
However, all of the growth has been met by foreigners. Sales of Russian brands have stayed flat for the past few years – hovering between 750,000 and 800,000. Early in 2002, a few years before foreign carmaker's rushing into Russia, the Russian government slapped a 25 percent duty on imported used cars when domestic carmakers were struggling with challenges from imported second-hand cars. Unfortunately, later new imports