Industry insiders warn Russia may hit 1.7 million car sales in 2024, risking overstock as demand lags. Price and financing factors loom large
socialbites.ca
The Russian automobile market is facing overstocking. When will Chinese cars become cheaper? Automobile expert Moseev: Chinese cars may become cheaper in the first quarter of 2024 01/19/2024, 14:15
By
ANIKA
January 25, 2024
According to the plans of Russian automobile manufacturers, as well as representatives of Chinese automobile companies officially operating in our country, approximately 1.7 million cars are planned to be sold in Russia by the end of the year. Considering that less than 1.1 million cars were sold in the country last year and the most optimistic forecast for 2024 is 1.3 million, it seems that the Russian market is in danger of overstocking in warehouses. Alexey Podshchekoldin, head of the Russian Association of Automobile Dealers (ROAD), stated this at a press conference in Moscow.
“If every manufacturer brought more cars to market than could be sold
This will turn into a discount war.
This sounds great, but it will result in the bankruptcy of both individual companies and dealers,” Podshchekoldin said.
According to him, the Russian car market is experiencing overheating, which is caused, among other things, by the lack of cheap loans for the purchase of cars. At the same time, almost every second car was previously purchased on credit.
“Our new car now costs almost 3 million rubles. They said there are not enough cars, but there are no cheap cars either. And for 3 million rubles no one will buy so many cars, especially with loans like today,” said the head of the Highway Traffic Safety Inspectorate.
The head of an industry association hopes Chinese auto companies will adjust their 2024 sales plans downward. The total sales plan of Chinese and domestic passenger cars as of December 2023 is 1.7 million, and taking into account the market capacity estimate (optimum – 1.1 million cars and maximum – 1.3 million), there may be an extra 500-600 thousand cars in Russia. Podshchekoldin calculated what the cars were.
Andrei Olkhovsky, general director of the Avtodom group of companies, admits that dealers have already traded in their warehouses for more than two months.
“The growth of warehouses is due to the fact that:
demand dropped, pre-ordered cars kept arriving, and sales plans were not adjusted in time.
Promotions and special offers will depend on the duties and wishes of the suppliers. Special offers cannot be avoided if they continue volume deliveries,” Olkhovsky said in an interview with socialbites.ca.
If a more conservative scenario is chosen and supplies are adjusted based on demand and shipments to customers, pricing will likely remain the same, he added. At the same time, he explained that the vehicle stocks in dealer warehouses are very different in absolute numbers and that each company creates a warehouse according to its own sales plan.
Ilya Petrov, director of retail sales of the Avilon automobile group, believes that the situation with the presence of excess (maximum stocks) of cars of Chinese brands and brands that have left the Russian market is exaggerated.
“The volumes of cars in warehouses today are not critical and do not cause noticeable harm to the seller and importer,
They prove their presence in the warehouse by the breadth of the product range in terms of configurations and colors that will meet customer demand, Petrov told socialbites.ca.
According to him, the availability of vehicle stock at dealerships does not mean the end of a period of trouble in the industry as a whole; Vehicle shortage continues in some models in different segments.
“In this environment, we should not expect new car prices to decrease. In general, there are no prerequisites for price reductions in the industry.
“Pricing depends on a number of other factors and, in particular, the exchange rate against the ruble.”
– Petrov noted.
He added that this indicator will continue to influence price changes in 2024.
The characteristics of Chinese business are such that the management of Chinese automobile companies is very reluctant to admit errors in planning and correct them, compared to European, Japanese and Korean companies. In addition, Oleg Moseev believes that cars planned to be sold in Russia have already begun to be produced at factories, the necessary components for them have been purchased, so discounts are expected first from dealers, and then from representative offices of Chinese brands. Founder of the Automarketer project.
“For normal sales, you usually need a 1-1.5 month stock of cars; The current two-month supply is also not critical. But we must understand that this is an average figure and there are brands that have already accumulated three months of stock,” Moseev told socialbites.ca.
In general, it is now clear that there are more cars than are required for sale, and an increasing trend of “overstock” has been observed for several months. He added that the supply of cars will also increase.
“The production and delivery order cycle of cars is not an instantaneous story. “Since they planned a certain number of vehicles for 2024, these plans were coordinated with the center, the components of these machines were ordered and last year these machines started to be produced in factories,” he said.
He believes that the situation can be radically changed by a price reduction, after which some customers will turn to new cars from the secondary market, in addition, some will consider selling their cars and not postponing the decision to buy a new car.
“In the first quarter, dealers will have to give discounts to sell their vehicle stocks. The margin on cars is 5-7% and the dealer will not be able to move much to avoid trading at a loss. I think price competition between distributors will start in the second quarter,” Moseev said.
The Russian Automobile Dealers Association warns that the Russian market is threatened by an oversupply of Chinese cars, which will force dealers and car companies to reduce prices or adjust sales plans. Read about when and how much cheaper new cars can become in the socialbites.ca article.
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