The recovery of Russia’s automotive sector continued in August with car sales rising again, up 17% y/y to 132,742 units according to the Association of European Businesses (AEB) that tracks sales. 

Russia came close to overtaking Germany as the largest car market in Europe in the first half of 2008 with 2mn unit sales. However, the market then slumped after the global financial crisis started and only returned to growth at the start of this year. Sales over the first half of this year were 566,266 units, a quarter of the same peak period of the first half of 2008.

August sales resulted in YTD sales increasing 10% y/y to 980,921 units, according to the latest data from AEB. The nature of the sales have changed from the pre-crisis period, with mass brands and made-in-Russia brands doing a lot better than premium (foreign) brands, as Russians trade down and become more price sensitive.

AvtoVAZ, the maker of the iconic Lada, remains the undisputed market leader with a 19.7% share both in August and YTD on the back of a strong improvement in its sales this year. The Lada was widely abandoned by Russians in the boom years, but has experienced a renaissance since thanks to updated models and a lower price.

Sollers, which makes many foreign brands under license in Russia, saw the sales of its Russian-brand SUV, the UAZ, stay in the red, although the rate of decline was moderating, reports AEB.

However, the company’s finances have vastly improved thanks to the return to growth of the sector. Net profit skyrocketed 17-fold y/y to RUB575mn (€8.2mn) in January-June, the company announced on August 28, partly thanks to a state-sponsored discount programme on car loans.

An investor’s favourite, VTBC said in a note: “The recent statements by Sollers CEO Vadim Shvetsov suggest a further improvement in 2H17. This improvement, along with an undemanding valuation, as the stock trades at discounts of about 60% to peers on 2017-18F EV/EBITDA of 3.1-3.5x, underlies our positive view on Sollers.” VTB has the stock as a “buy” with a 12 month target price of RUB750 per share.

The rate of the Russian auto market recovery was strong in August, even though it slightly moderated from July (+19% y/y). Analysts expect the rate of recovery in the rest of the year to moderate, but at the same time they also expect the recovery of the sector to continue as Russia’s economy returns to steady if unspectacular growth. 

Out of the top 10 brands, six saw an increase in sales of above 20% in August, reports AEB: AvtoVAZ (#1; +25%), KIA (#2; +29%), Renault (#4; +22%), Nissan (#7, +21%), GAZ (#9, +32%, LCVs only) and Ford (#10, +24%).

The underperformers included Hyundai (#3; +13%), Volkswagen (#6; +16%) and Skoda (#8, +10%), but still showed a double digit increase in August, with only Toyota (#5, -7%) being in the red among the top 10, reports AEB.

With the exception of Infinity (+21%), premium brands underperformed the market in August, while the trends among this group were fairly mixed: Mercedes-Benz (+5%, passenger cars only), BMW (+11%), Lexus (-13%), Audi (-21%), Land Rover (-4%), Volvo (+11%), Porsche (+8%), and Jaguar (-9%).

At the very top of the chain Bentley saw its sales contract sharply in the first half of this year.