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Russian Auto Consumption Tendency

Robert Liu From Gasgoo.com| April 13,2007

Russia is a big country with territory covering half of Eurasia but only a few people scattered in the land. Auto is a necessary tool for people to go out for work or visit places. Since they are becoming wealthier, to buy a new car complying with their own tastes is not a dream far away from their real lives.

  • Cost effectiveness makes foreign cars more popular than domestic ones

Consumers increasingly give preference to foreign models, considering a better deal in terms of cost effectiveness than domestic models. Needless to say, the Russians' steadily growing incomes are a significant factor here. The number of people who can afford to pay $10,000 to $15,000 for a car (especially on credit) has grown substantially. Incidentally, these people usually choose Russian-assembled foreign models because they are 10% to 15% cheaper than the same imported models. By creating strong demand for these cars, they act as the primary force stimulating the production of foreign cars in Russia.

  • Autos at reasonable prices by foreign makers gain popularity

In Russia, people are interested in the cars ranging from 9000$ to 15000$. As foreign automakers are starting to produce reasonably priced vehicles (the Renault Logan, for example, retails for around $8,000) ordinary Russians are increasingly taking them out of the showroom in preference to similarly priced domestic models, which are not always seen as entirely reliable.

  • Second-hand cars come to lose its market

The share of foreign cars assembled in Russia grew by 3%, whereas the share of used cars fell by 5% to 7%. Many Russians buy second-hand vehicles - often at outdoor markets - that have been specially brought to the country from the Baltic States or further a field. But many are thought to have been involved in smashes that would have left the original vehicle as a write-off in some countries.

  • Consumers like to enjoy brand-new cars, not influenced by old consumption belief

Russian people are quite practical, and eager to get taste new things as they want, which make them quite different from Western European neighbors. They are not influenced by traditional auto consumption belief that old brands like BMW etc. are more reliable and worth of trust. They are quite interested in big-in-size; more powerful cars made in East Asia, so that they can run faster than others and survive in traffic accidents in snowing days. Those brand-new cars reliable but cheap can open the market easily.

  • Auto loans in Russia assist people in auto purchase

Car loan sales in Russia become more and more popular. According to the study from Russia Business Vision. Car loan sales increased by from 2% in 2002 to 35% in 2003 for two reasons: firstly, the procedure is simple. Generally speaking, the car buyers can only show their ID cards and legal income, sometimes just their driving licenses or passports, then they can drive the cars back after 3 or 4 days; sometimes they can get the cars just several hours later, with more money paid back. Secondly, the interest rate for car loans continues to decline. More banks are willing to give consumers different kinds of loans to choose. Bank loans stimulate the market demand greatly.

More and higher performance-cost ratio cars and improved financial environment will assist Russians to assume more cars according to their own needs.

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