* Russia to rank world's fifth by 2020-report
* Sees average annual growth rate of 6 percent
* Emerging markets will account for 65 pct of auto sales by
MOSCOW, July 19 Russia's auto market is on track
to overtake Germany and become the largest in Europe - and the
fifth biggest globally - by 2020 as car ownership increases,
supporting a large local industry, a Boston Consulting Group
Western carmakers including General Motors, Ford
, Renault and Fiat have invested heavily
in Russia, betting that the market will grow as a rising middle
class becomes first time car owners or upgrades aging models.
There are only 290 cars per 1,000 Russians versus 560 in
Western Europe and many of those vehicles are old, while a
decade of strong growth driven by Russia's mineral wealth is
slowly empowering a greater chunk of its population.
"Fundamentally its an attractive market in terms of cars per
thousand inhabitants and therefore we are bullish long-term -
but that doesn't mean that every year will be a good year," said
Ewald Kreid, one of the authors of the report and a partner at
BCG in Vienna.
The report predicts that Russia can follow Brazil and China
in transforming itself from a market targeted by foreign
exporters, to one with a dominant share of locally-produced
BCG forecasts that Russia's auto market will grow by an
average annual rate of six percent through 2020, when it will
reach annual sales volume of 4.4 million.
That would make it the fifth largest in the world by sales,
after China, the U.S., India and Brazil, the report said. Last
year, Russia ranked seventh in the world after China, the U.S,
Japan, Brazil, Germany and India. In 2009 it was tenth largest.
The report projects that emerging markets overall will
account for 65 percent of global car sales in 2020, more than
double the 28 percent for which they accounted in 2000.
Russia was on course to become Europe's biggest market
before the 2008 financial crisis hammered the availability of
credit and demand.
BCG's forecast for Russia is a bullish prognosis compared
with recent figures from the Association of European Business
(AEB), which tracks the Russian car market. Data from the AEB
showed car sales have fallen for four straight months as
Russia's $2.1 trillion economy falters.
The AEB recently cut its full-year forecast to 2.8 million
units, which would be a fall of 5 percent, but said it expects
government plans to subsidize credit-backed vehicle purchases
will boost sales for the remainder of the year.
BCG said its prediction takes into account the current
weakening of the market.
A stronger manufacturing sector has long been the missing
piece of an economic success story which has made Russia's
oligarchs rich but also expanded the gap between the country's
haves and have-nots.
The report said both local and international carmakers were
expanding, calculating total production capacity would rise to
about 3.3 million vehicles per year by 2016, up from 2.3 million
But, in a sign that many of Russia's less technologically
advanced producers are struggling to compete, last year for the
first time more cars made by localized international producers
were sold in Russia than either imports or domestic brands.
The report also said that only 20 percent of domestic parts
manufacturers were likely to survive by 2016.
While Russia will remain a net importer of vehicles in 2020,
exports will also increase, BCG forecast, as during downswings
companies are likely to tap exports from Russia to send to other