Russian Auto Market Shrinks for 7 Months in a Row

Hyundai Motor Group's factory in Saint Petersburg, Russia

Hyundai Motor Group's sales slowed down in Russia in October. The Russian automobile market shrank for seven months in a row so Hyundai Motor began to feel the heat.

The group's Russia sales in October amounted to 36,147 units, down 2.3 percent from last year. In particular, Kia Motors recorded a big drop in sales. Kia Motors sold 20,141 units, a decrease of 4.1 percent on year. Hyundai Motor Co. sold 16,006 units, the same as last year.

The decrease in sales in October is blamed to the contraction of the Russian car market for the past seven months. Car sales in Russia fell 2.7 percent in April from the previous month, with the drop widening to 5.2 percent in October. As a result, cumulative car sales in Russia in the January-October period fell 2.4 percent on year to 1,423,449 units. Industry watchers say that the Russian government's increase in value-added tax from 18 percent to 20 percent early this year caused a slowdown in consumer demand, affecting the Russian automotive market.

At present, Hyundai Motor Group ranks second in the Russian automobile market with a 23.7 percent share. The group built a plant in St. Petersburg in Russia in 2011 and strongly pushed forward with a localization strategy, which paid off handsomely. First place is taken by Renault Nissan Group with a 34.4 percent share.

Hyundai Motor Group is looking to dominate the next-generation mobility market based on its high market share in Russia. It is massively investing in the Russian market. In May this year, it opened the Hyundai Mobility Lab in the Skolkovo Innovation Center, a Russian version of Silicon Valley, to penetrate the local vehicle-sharing market.

As such, the slowdown in Russia sales is all the more disturbing to Hyundai Motor Group.

The problem is that the group is facing similar situations in the Chinese and Indian markets. It has been suffering negative growth in the two key strategic bases, and its local sales are on the decline. Hyundai Motor sold 59,153 units in China in October and this means that its sales fell 16.7 percent from last year. In the same period, Kia Motors sold 22,483 units, down 24.0 percent from a year before.

The fall in the Hyundai Motor Group’s sales is smaller in India than China but its sales have been going downwards in the Indian automobile market. Hyundai Motor sold 50,010 units in India in October, recording a year on year drop of 3.8 percent in sales. Kia Motors which entered the Indian market in August sold 12,850 units during the same period.

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