Russian auto sales slow as crisis hits car loans

The best-sold foreign model in Russia, according to AEB, was the Chevrolet Lacetti, a locally assembled model.

MOSCOW -- The Russian car market is suffering from a lack of consumer confidence as the global financial crisis spreads to auto loans, research company Nielsen said on Tuesday.

Every third car owner in the country ??31 percent ??claims to delay replacement or purchase of a car because of the current economic situation, Nielsen said in a research note called Back to the Nineties.

"It is very likely that in 2008 the Russian automotive market which has been enjoying fabulous growth - by 35 percent in 2007 - will show slow down for the first time in the past few years," said Olga Belova, a research director at Nielsen Russia.

Russia was on course to become Europe's largest car market this year after a decade of an oil-fuelled economic boom, but sales figures have dropped sharply in the past three months as the crisis forced banks to reduce cheap retail lending.

The latest, October, data compiled by the Association of European Business in the Russian Federation showed on Tuesday that the growth of foreign car sales in Russia slowed to its lowest annual pace since January 2007.

The best-sold foreign model, according to AEB, was the Chevrolet Lacetti, a locally assembled model.

Among the major reasons for the lack of consumer demand for cars in October was the auto loans crisis in Russia, Nielsen said, as banks had to halt their car loan programs or tighten the terms and raise rates.

"Auto loans were one of the key drivers of the Russian automotive market sales... Now consumers have to cope on their own or find other additional financial sources to buy a car," said Yaroslav Zaytsev from Nielsen's online project Autoopros.

"There is a big possibility that until (the) auto loans market in Russia recovers, it is very likely that the automotive market will return to the nineties when everything was bought on hard cash," he added.

The negative trend is clear, but Russian consumers are far from being panicked. Almost half of the respondents of the Nielsen survey said they had already bought or still planned to buy a car despite the financial turmoil.