What Awaits The New Car Market In 2020: Three Predictions

2023 Author: Natalie MacDonald | [email protected]. Last modified: 2023-11-26 13:59

In 2019, Russia registered 1.59 million new vehicles - 2.5 percent less than a year earlier. Auto business representatives believe that 2020 will be even more difficult and, according to various estimates, the market will sag by 2-10%. We found out the forecasts of experts and made several of our own.

What analysts say Avto.ru

Negative scenario suggests continued growth in car prices against the background of deteriorating welfare of the population. And so far, there are no prerequisites for improving the financial situation of Russians. For the same reasons, the average life of the vehicle is also lengthened.

Several other factors contribute to the rise in prices for new cars. In 2019, the revision of price lists was influenced by an increase in VAT, and in 2020, an increase in the rates of the utilization fee will affect. In addition, carmakers are forced to fight for state support, increasing local production, which requires additional investments, which are somehow included in prices.

The programs "First Car" and "Family Car", which were extended for 2020, will not be enough for market growth: the state support budget is 5 billion rubles, which will end in a few months, and the maximum price of a car for which a subsidy is allocated is 1 million rubles - and this is noticeably below the average market price for new cars. The low price bar also limits the choice of buyers, mainly supporting the demand for cars from Russian manufacturers. The government has already promised to increase the amount of state support if the money runs out ahead of schedule, but does not plan to change the terms of the program.

The coronavirus epidemic in China is likely to have a negative impact not only on the automotive business, but also on the economy as a whole. In China, auto components and components are produced for most car brands, including those that have their own car factories in Russia.

Optimistic scenarios in the medium term are also possible. This requires that the incomes of the population begin to grow, or at least slow down the decline. At the same time, carmakers will need to make additional efforts to contain prices, and it is important for the government not to create additional financial burden on manufacturers.

In this scenario, the market may show positive dynamics, primarily due to the implementation of deferred demand. If this happens, then already in the perspective of three years we will be able to see the results of sales close to 2 million cars per year.

So what will actually happen in 2020? Auto.ru analysts' expectations are rather pessimistic. In the current economic situation, the most likely option is a 5-7% decline in sales, which will continue in 2021. In the event of serious problems in the country's economy, the emergence of new sanctions or a sharp weakening of the ruble against foreign currencies, the drop in demand may exceed 10%, and in the short term, the market risks returning to the indicators of 2016.

What the experts say

Timur Valiullin, Commercial Director of the TransTechService Group of Companies, believes that in 2020 the market will shrink by 5%. However, in his opinion, the stability of the ruble and the understanding of the prospects of the economy by the population will ensure positive expectations in society and will be able to stimulate credit sales. “The beginning of the growth of incomes of the population, or at least an end to their decline, will also create positive sentiments and have a positive effect on the sale of durable goods, including cars. Otherwise, all these factors will have a negative impact on the Russian automotive market,”the expert said.

The KLYUCHAVTO Group of Companies believes that the decline will not be so strong, and by the end of the year the market for new cars will drop by only 2%. The market launch of new models in various price segments will have a positive impact on the dynamics of demand: new items always cause a certain resonance and ensure sales growth. In addition, one of the positive factors will be the effect of the renewal of the fleet of cars purchased 5-7 years ago.

Changes in the nature of consumer demand have a negative impact on sales, according to KLYUCHAVTO. Today, consumers often prefer to take a car for use, rather than own it: this leads to an increase in the popularity of car sharing or long-term rental services, as well as to a decrease in sales. In addition, experts see negative phenomena in the country's economy as a whole and a drop in purchasing activity among the reasons for the slowdown in sales. The company also notes that the state support programs "First / Family Car" may not fully support the market, but the demand for them is still high and provides a certain increase in sales.