Russian car industry leaders eye brighter future

MOSCOW (Reuters) - Russia's car industry predicts a return to pre-crisis demand levels at around the middle of the decade, although concerns about local suppliers and the high cost of credit remain obstacles to growth.

Consensus among senior industry directors is that 2008 highs of just under 3 million annual car sales could be scaled after a few years of slow growth, supporting government forecasts.

"We expect the market will gradually grow to pre-crisis levels, but it will take a while -- (until) 2013-2014," Martin Jahn, a Vice-President for Volkswagen (VOWG_p.DE), told Reuters on the sidelines of the Russian Automotive Forum in Moscow.

Russia had been expected to overtake Germany as Europe's biggest car market before sales more than halved in 2009, a fall from grace blamed on the depreciating rouble and the drying up of consumer credit.

Recent sales figures have been equally dire, down 37 percent in January and 32 percent in February, but the government has pledged to pour billions of dollars into the worker-intensive industry and launched a new scrappage scheme to help consumers.

"We are seeing the market come back slowly -- that's the feeling we get from retailers -- although it will take two years at least to get back to 2008 levels," Volvo Cars Russia President David Thomas said by telephone.

STRONG INCENTIVES

The scrappage scheme -- which offers consumers 50,000 roubles ($1,698) toward replacing cars more than ten years old -- is expected to provide a boost to sales, as it has in other markets including Germany.

The cost of consumer and corporate credit remains an issue for buyers, however, a concern acknowledged by Russian Deputy Economic Minister Andrei Klepach, a keynote speaker at the annual autos forum.

"Commercial credit for corporates and consumers is still very high," he told a packed conference room in a Moscow hotel.

Martin Jahn added that while consumers could benefit from the scrappage scheme and other state initiatives, companies were left in the cold.

He also led a number of attendees warning that local suppliers were not of the standard of those in Western markets.

"We clearly need strong incentives from the government to suppliers, such as investment in infrastructure in industrial parks," he said, adding that Western suppliers were not currently interested in major Russian investments.

The Russian Automotive Forum comes at a hectic time for the Russian car industry. The government is in the process of plotting the rescue of Lada-maker AvtoVAZ (AVAZ.MM) -- conspicuous in its absence from the forum -- while Western car-makers such as Renault (RENA.PA) and Fiat (FIA.MI) have grabbed a slice of the market.

Russia's GAZ (GAZA.RTS), controlled by industrialist Oleg Deripaska, is in talks to find its own partner.

($1=29.44 Rouble)

(Writing by John Bowker; editing by Simon Jessop)