UPDATE 2-Russian car sales flat, reversing trend

Mon Dec 10, 2012 9:51am EST

* Increasing interest rates, consumer uncertainty weighing in on car sales

* Analysts predict largely flat growth or 3-4 percent in 2013

* Return to high growth in the sector not predicted until 2015

By Sonia Elks

MOSCOW, Dec 10 (Reuters) - Russian car sales in November were flat for the first time in more than two years as Russians put off spending following a slowdown in the country's economy.

Western car makers such as General Motors, Ford , Renault and Fiat have invested heavily in Russia in the hope a growing middle class will increase its spending, but a slowing economy and rising interest rates has caused would-be buyers to pull back, analysts said.

A total of 240,322 vehicles were sold in November, up 0.4 percent from a year ago, a slowdown from the previous month when sales rose an annualised 5 percent, the Association of European Businesses (AEB) said on Monday.

Industry analysts predict car sales figures could remain flat until 2015.

"For the first time in well over two years the Russian car market is not growing but just holding the sales volume achieved in the same period one year ago," said Joerg Schreiber, Chairman of the AEB Automobile Manufacturers Committee.

"The present situation in dealer showrooms across the country is such that we do not expect a quick return to growth in the coming months."

Schreiber said customer activity and purchase appetite in recent months had been weaker than last year.

Sales over the first 11 months of the year were 2.68 million cars, up 12 percent on a year ago, after a 13 percent rate in January-October.

However, the AEB said cumulative growth figures will push closing figures for Russian sales for 2012 to 2.9 million, meeting the AEB's expectations for the year.

The Russian car market is expected to overtake Germany as Europe's biggest some time this decade.

Analysts said the slowdown was not a surprise, as the Russian economy has been slowing.

Russia's GDP growth slowed to 2.9 per cent in the third quarter from 4.9 per cent in the second quarter while auto loan interest rates are typically double digit, often around 15 per cent - and can reach over 20 per cent.

Carol Thomas, central and eastern European analyst at auto forecasting group LMC Automotive, predicted that the car market would see only modest growth of around 3-3.5 percent annually until 2015, when it could reach 6 percent.

"We have expected a much slower rate of growth over the next year, but it all very much depends what happens in the euro zone and the rest of the world," Thomas said.

However, she said that the end of 2011 and early 2012 had seen "exceptional growth" that was "probably not sustainable".

"It is not as bad as it looks - it is more a flattening of growth than a real slowdown," Thomas said.

Vladimir Bespalov, an analyst at VTB Capital, predicted that car sales growth is only likely to gain a few percentage points of up to 4 percent in 2013.

"In the coming months the performance will be broadly flat, it could be zero, it could be minus something, but basically flat," Bespalov said.

"When you see the economy is slowing down and consumer confidence is declining, (durable goods) are affected most, because these are goods that people can buy later. They can always postpone buying a car or a house - especially when the situation is not that stable."

A couple walks along the rough surf during sunset at Oahu's North Shore, December 26, 2013. REUTERS/Kevin Lamarque

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