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Russia's auto industry in slow lane

Tuesday, March 31, 2015 - 02:15

After several years of growth in excess of 10 percent, car sales in Russia shrank in 2014 due to Russia's sanctions-hit economy. As Sonia Legg reports, many auto makers are being forced to restructure their Russian operations.

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Ten percent growth every year - that's what Russia's auto industry has seen recently. Not any more. Car sales shrank in 2014 as the economy weakened due to Western sanctions over the Ukraine crisis and a slide in oil prices. Vitaly Gorshenkov is Commercial Director at the Avtomir car dealership in Moscow. (SOUNDBITE) (Russian) COMMERCIAL DIRECTOR FOR AVTOMIR CAR DEALERSHIP, VITALY GORSHENKOV, SAYING: "In January we saw a fall of more than 20 percent, in February it was 38 percent. March is also looking difficult and I don't think we have reached the bottom yet." The rouble's 40 percent fall against the dollar in 2014 hasn't helped. It's made consumers think twice about large purchases and made manufacturers look at ways to cut costs. General Motors is shutting a factory in St Petersburg with the loss of a 1,000 jobs. It's also winding down its Opel brand and stopping assembly of Chevrolet cars. It's not the only major auto maker restructuring Russian operations. Ford has cut jobs at its joint venture factory, sparking protests from workers. Nissan is temporarily halting production at its St. Petersburg plant. And a Russian venture owned by PSA Peugeot Citroen and Mitsubishi is doing the same. Alexei Etmanov is Chairman of the "Work Force" Union. (SOUNDBITE) (Russian) CHAIRMAN OF PROFESSIONAL UNION 'WORK FORCE', ALEXEI ETMANOV, SAYING: "About 1,200 people will lose their jobs and it means the salaries of other workers will fall." PriceWaterhouseCoopers forecasts the Russian car market will shrink by up to 35 percent in 2015. Sergei Litvinenko is Director of PWC's automotive practice. (SOUNDBITE) (Russian) DIRECTOR IN PRICEWATERHOUSECOOPERS RUSSIA'S AUTOMOTIVE ADVISORY PRACTICE, SERGEI LITVINENKO, SAYING: "The situation this year is different from what we saw in 2008-2009, when the market also slumped substantially. Then it was mainly due to external factors, now it's structural problems within the Russian economy that's limiting growth and preventing people from spending on cars." Russia's Economy Ministry says it expects the domestic car market to return to growth in 2016. And it's promising financial support for the industry But the measures may have to be quite generous. Opel says it sold just 912 vehicles in February - 86% less than last year.

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Russia's auto industry in slow lane

Tuesday, March 31, 2015 - 02:15