Russia's car sales to fall in 2020 for second year in a row

MOSCOW (Reuters) - New car sales in Russia this year are set to fall 2.1% year on year to 1.72 million vehicles after a 2.3% drop last year, the Association of European Businesses (AEB) said on Tuesday.

The forecast puts Russia’s car market on course for its second annual contraction in two years, despite new sales in December rising 2.3% year on year and recovering from a 6.4% drop the previous month, according to the AEB.

“The year 2019 proved harder than expected,” said Joerg Schreiber, chairman of the AEB automobile manufacturers committee, which comprises the majority of car manufacturers operating in Russia.

The “size of Russia’s auto market remains small and lower than its potential,” he told reporters.

Russia’s car market was given a much-needed boost in 2018 when it expanded by 12.8%. But falling real incomes have fueled a subsequent contraction.

Russia’s biggest automaker Avtovaz also expects the car market to contract again in 2020, primarily due to depressed consumer incomes, a company executive said on Monday.

Reporting by Gleb Stolyarov; writing by Tom Balmforth; editing by Maria Kiselyova and Mark Potter