UPDATE 2-Russian car sales seen down for second year in row

Wed Jan 15, 2014 8:26am EST

* Lobby group sees 2014 sales at 2.73 mln units on average

* Last year's sales fell 5.5 pct

* Automakers bullish on market long-term

By Megan Davies

MOSCOW, Jan 15 (Reuters) - Russian car sales fell in 2013 and face another weak year as a stuttering economy puts off buyers, dealing a blow to western automakers that have invested heavily in the country on the expectation it would soon become Europe's biggest car market.

A lobby group for Europe's top carmakers said on Wednesday sales of new cars in Russia fell 5.5 percent last year, bringing three years of double-digit growth to an abrupt end.

It also predicted the country would continue to lag European market leader Germany for now.

"Russia will remain in second place in Europe in terms of the volume of the auto market," Joerg Schreiber, chairman of the Association of European Businesses (AEB) auto association, said at a news briefing.

Car and light commercial vehicle sales are expected to fall by 1.6 percent in Russia in 2014, the AEB said, giving a central forecast of 2.73 million units within a 2.64-2.85 million range.

"(It's the) general economic situation, if you look at other consumer goods - white goods etc - everything went down," said Schreiber. "Now all hinges on - is there still consumer appetite or not?"

A Reuters poll last month showed economists expecting Russia's economy grew just 1.4 percent last year, less than half of their forecasts a year earlier, due to weak investment and tapering consumer demand.

They predicted growth of 2 percent for this year, against the government's forecast of 2.5 percent.

DEPENDING ON SUBSIDIES

The decline in car sales last year was reduced by a government loan subsidy programme which ran from July to December. The scheme boosted sales in the final month of the year, with December sales up 4 percent following nine straight months of falls, the AEB said.

Auto executives, resolutely bullish that Russia's rising middle class will support sales long-term, do not predict another crisis, but are worried about an extended contraction in sales.

Western carmakers including General Motors, Ford , Renault and Fiat have invested heavily in Russia. Schreiber said some of the manufacturers that bet on Russia may have rethought the scale of their investments "had they known that they would be dependent on state subsidies".

Manufacturers have now adjusted their production levels in line with the market, Schreiber said.

"Everyone has shrunk to a state of reasonable healthiness and now are waiting for what the New Year will bring," he said. "Should demand go up, I'm sure manufacturers will be in a position to quickly replenish."

Dealerships have felt a heavy blow from the falling sales and have seen their income hit as they offered larger discounts and increased their marketing spend to lure customers, he added.

VTB analyst Vladimir Bespalov said the AEB's figures showed a stabilising market, with the 2013 decline slightly above his forecast for a 6 percent drop. He is predicting a one percent increase in car sales for 2014.

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