Russian car market must wait for economy to improve

Subject

The Russian car market.

Significance

The car industry has undergone enormous changes, with foreign companies at the forefront of the transformation. Foreign involvement has risen over the past decade as policies promoting localisation of production attracted foreign investment. However, Russia's economic slowdown has led to some companies -- most notably General Motors (GM) -- announcing a reduction in their Russian operations. Over the last few months, other major Western brands have also reduced production in Russia. Russia's bleak economic prospects may cause other companies to replicate GM's policies, as a slowdown in consumer spending could cause the market to shrink further.

Impacts

• Some manufacturers' decisions to halt production in Russia will cause some local unemployment.
• However, volumes of foreign production in Russia's will remain high -- companies that stay may benefit from enhanced market share.
• Some companies have placed Russia at the centre of their wider corporate strategies and will be reluctant to leave.