August 29, 2012
Dealing with It
Aug. 28 – Moscow – Euro-crisis concerns may prevail elsewhere, but in St. Petersburg and Moscow a consumer buzz is apparent as disposable incomes grow and are indeed being disposed.
At a Genser Nissan dealership in the nation’s capital, the differing fortunes are on display, as the facility is Europe’s largest in terms of space and sells 400 new cars a month. The dealership’s top models are crossovers, but Moscow Car-center Director Andrey Terlyukevich says the purchases are often second cars and a doubling in overall volume should be expected.
Many foreign car firms such as Nissan are raising Russian production capacity in the $1.9 trillion economy, expected to see 4.5% growth this year. The Moscow International Motor Show this week will likely underscore how important the nation already is to the auto industry and the growing bets on its future.
The vast nation and relatively vibrant economy joined the World Trade Organization this month after a near 20-year quest, the 156th nation in the multilateral forum. As part of WTO entry, Russia will reduce trade tariffs and is seen shifting its economic engines from energy production and commodities to manufacturing and services. For carmakers, that means a drop in Russian import tariffs on automobiles from the current 30% to 25% near-term, and a reduction to 15% by decade’s end. For the light commercial vehicle sector, in particular, the cuts are expected to be significant.
The World Bank estimates WTO entry will add 3.3 percentage points of growth to Russian GDP, but not everyone is convinced that a seat at the trade table will be as significant as China’s joining in 2001. Nonetheless, the advantages for Russian consumers in terms of product choice and cost are expected to be tangible, with dealerships such as Genser’s in Moscow open more than 12 hours a day to welcome them.
Dan Sloan, Editor in Chief
Global Media Center