Russia New Car Sales Fall 17.6% Year-on-Year in August

According to Reuters, data released on September 3 showed that new car sales in Russia in August fell by 17.6% year-on-year, a larger decline compared to the 11.4% year-on-year drop in July, indicating that despite the interest rate cuts, the Russian car market has yet to recover.

Image source: Avtovaz, Russia's largest automobile manufacturer

The Central Bank of Russia cut the key interest rate by a total of 300 basis points to 18% in June and July, and analysts expect further gradual rate cuts in the future. However, the Russian car market remains under pressure, with sales declining for seven consecutive months.

Analytical agency Autostat pointed out that Russia's new passenger car sales in August were 122,235 units. In the first eight months of this year, Russia's new passenger car sales fell by 23% year-on-year to 773,264 units.

In 2022, due to the escalation of the Russia-Ukraine conflict, the West imposed severe sanctions on Russia, leading to a precipitous decline in the Russian automotive market. Starting from April 2023, the Russian automotive market began to steadily recover, but the momentum stalled in February this year, affected by factors such as market saturation, rising interest rates, and increased scrapping costs.

Sergei Udalov, Executive Director of Autostat, told Reuters that the Russian car market has shown signs of recovery for two consecutive months, but the overall trend remains unstable. From February to June this year, the monthly year-on-year decline in new car sales in Russia ranged from nearly 25% to over 45%.

Sergei Udalov pointed out that discount offers and low-interest rate policies launched by dealers to clear inventory have provided some support to demand. However, the key interest rate of the Russian central bank remains at a relatively high level, which not only suppresses consumer spending but also prompts consumers to choose to deposit funds into bank accounts rather than use them to purchase cars. He stated that rapid growth in the Russian car market is unlikely in the coming months.

According to data from the Central Bank of Russia, in July this year, deposits by Russian residents in domestic banks reached a record high, increasing by 0.8 trillion rubles to a total of 61.1 trillion rubles.

The Association of European Businesses (AEB) stated that the data for August indicates that the Russian automotive market continues to show signs of stabilization, but under the current operating environment, the growth potential of the Russian automotive market may be limited.

AEB predicts that in 2025, car sales in Russia will decrease by 24% year-on-year to 1.25 million units. At the same time, AEB stated that the Russian government's support programs and potential further interest rate cuts in the future will be key factors driving the recovery of the Russian car market in the short term.