* Rouble slide hurts consumer confidence, helps vs imports
* Car sales predicted to fall again this year
* Avtovaz boss says long road to turn around car company
By Megan Davies
MOSCOW, March 18 The damage to consumer
confidence in Russia from a plunge in the value of the rouble
could be offset for local carmakers as they become more
competitive against foreign imports, industry leaders and
government officials said on Tuesday.
The rouble has dropped 11 percent this year as investors
price in the risk that Russia's annexation of Crimea may lead to
economic retaliation from the West.
"For any deeply localised and self-sustainable industry it
will be a big, big benefit - we will be more competitive on the
global markets," Alexei Rakhmanov, deputy minister of industry
and trade, said on the sidelines of an Adam Smith autos
conference in Moscow.
"It's more positive than negative .... There is some
dependence on foreign components and imported materials, but we
are working on this."
Rakhmanov forecast that Russian auto sales would drop this
year - down 6.5 percent in a worst case scenario, down 2.8
percent to 2.83 million units in the base case scenario, or down
0.7 percent on an optimistic scenario.
Car sales have faltered in Russia as economic growth has
slowed, causing people to put off large purchases. Car sales
fell 5 percent in 2013, according to lobby group AEB, which is
forecasting another weak year because of the fragile economy.
"The rouble works for us, as we have more local content than
anyone else. On the other hand it works against us because
consumer confidence is lower," said Bo Andersson, CEO of
Russia's biggest automaker Avtovaz.
"We are better positioned than the rest but maybe our
customers are more impacted by overall concern about the
For foreign carmakers, the news is not so good. U.S.
carmaker Ford Motor Co's Russian venture, Ford Sollers,
was reported by Russian media on Monday to be considering
suspending production at a factory from April to June.
"The ongoing weakening of the rouble puts additional
pressure on the Ford Sollers business," Ford Sollers said in an
emailed statement. "As always, we are constantly monitoring the
overall economic situation and will act according to the
Ford added it had no "statements on the speculation about
our production plans".
Russia's deteriorating relations with the West over Ukraine
and subsequent sanctions has punished other parts of the economy
as well as the currency, with the MICEX stock index down
13 percent this year. Analysts say the country may face
recession as a result of the crisis.
Rakhmanov said any action in terms of sanctions would be
reciprocal and that Russian industry could survive, but conceded
the risk to the country from a deterioration in relations.
"We are serious in attracting so many foreign investments to
Russia and to spoil it at one moment would be a silly exercise,
but it is a two way road," he said.
Rakhmanov said Russia had worked hard to build
self-sustainable businesses in every industry and "we feel ...
reasonably comfortable that we can survive on our own".
"On the other hand, I like to express the hope that common
sense will prevail and the long-standing economic benefits will
lead all the decision making," he added.
A recession in Russia could complicate Anderssen's drive to
turn around loss-making Avtovaz. The Swede, credited with
reviving Russian bus and truckmaker Gaz, started at the
automaker earlier this year and has announced plans to axe jobs
to help return the business to profit. [ID nL2N0KX0RR]
"The situation was extremely bad and people needed a wakeup
call," Andersson said, adding Avtovaz has been cutting its
inventories and production and that he had been holding 7am
meetings at the company's assembly plants to review production.
"It's painful for the people but I've done that now (for) 69
days, 7 days a week," he said of the meetings. "They're getting
used to it and I'm getting used to them," he added, predicting
it would take a long time to turn the company around.
Avtovaz is due to come under the control this year of
French-Japanese alliance Renault-Nissan , who
plan to win market share by taking its Lada brand upmarket.