Sales of cars and light commercial vehicles in Russia grew by 18.6% year-on-year in July, strengthening from the 15% y/y gain seen in May and June, the Association of European Businesses (AEB) that oversees the industry said on August 8.

In January-July overall, 0.85mn vehicles were sold, up by 8.5% y/y, indicating a solid market recovery.

Previously, in the second quarter sales grew by 12% y/y after the 1% y/y rise seen in the first quarter, which made the first quarter of growth seen on Russian car market in four years.

"It appears that, finally, the middle-class buyer has woken up, encouraged by a brighter outlook on the economy and embracing the package of purchase incentives put together by the government," Chairman of the AEB Joerg Schreiber commented.

He added that recent sales trend is "great news" and will feed the optimism that 2017 will indeed become a turn-around year for the industry.

VTB Bank commented on August 8 that strong July's sales result was a function of both the continuing market recovery and a favourable base effect. In addition, mass brands continued to outperform premium brands in July, which implies a fairly broad-based recovery.

At the same time, the bank does not "rule out that the recent weakening of the ruble might have incentivised some customers to buy cars before this depreciation is reflected in car prices". 

Russia's largest carmaker AvtoVaz (Lada brand) remained the market leader in the reporting month, with sales up 22% y/y in July and 14% y/y in January-July. Meanwhile, domestic car assembler Sollers (UAZ brand) saw its sales drop 15% y/y.

AEB previously said Russia's car market has the potential to end a four-year period of decline and to return to moderate growth in 2017 with 1.48mn vehicles sold, or 4% y/y above the 2016 result. In 2016, sales of new cars in Russia declined by 11% to 1.42mn units.

International business consultants PwC predicted that Russia's car sales will increase in 2017 for the first time in several years to 7% year-on-year. VTB Capital on August 8 expects the full-year increase in the range of 7-10%.