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Russian New Car Sales Geared for Growth
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Russian New Car Sales Geared for Growth

Olga Malinkina, Consumer Research Director, The Nielsen Company, Russia

Since the start of the Russian free market more than 20 years ago, car owners have been changing over their cars with greater frequency. Russian car owners today hold on to their vehicles an average of three or four years before purchasing a new one. In 2011, Nielsen projects almost 50% of automobile owners in the largest Russian cities will be looking to purchase new cars.

Motivating Factors

In a recent Nielsen online survey, car owners from Russia’s largest cities cited practical reasons such as wanting a safer or better equipped car when considering an automobile change. But while sensible reasons dominate, there is evidence that less practical motives are driving forces as well. The Nielsen study showed there are signs the Russian consumer market is recovering and that discretionary spending like car purchases is expected to grow. The research reveals an increasing importance placed on emotional motivation—one in five car owners say they want to change a car because they are ‘bored’ with the current one.

Price is Paramount

While Russians are feeling confident in the stability of their personal finances—two in three expect the state of their finances to remain the same or improve over the next 12 months—there is caution. One-third of those planning a car change in the next three years are prepared to spend conservatively by choosing lower-priced brands, more economical models, and basic packaging. Consumers cite the growth of car prices in Russia and increased interest rates as factors.

Payment Plans

Russian car owners plan to fund a vehicle purchase mostly through loans. Loan demand is expected to grow in the very near future—44% of those planning to buy a car in the next 12 months intend to use a loan; and both large, well-known financial institutions and small banks will have an equal crack at winning consumer attention. However, receiving a loan from a recognized bank is less of a priority than securing a loan with the most benefits. Options like early payoff without penalty and simple, clear credit terms are favored by consumers.

Funding Options

The Russian government’s recently launched subsidy program to encourage sales of Russian-produced cars received a lukewarm reaction—only 15% said they are interested. But 37% of consumers are ready to use the trade-in option offered by auto dealers.

Car dealers have an opportunity to better educate prospective buyers about trade-in options. Sparse or unclear information about the service and its benefits was cited by 15% of consumers who said they do not have enough information to make an informed choice. The majority of skeptics believe they would make more money selling their cars directly.

Cautious Optimism

The continuing uncertainty in the stability of the national economy and the current high rate terms of loans make one in three potential buyers moderate their appetites to avoid risking the family budget. A reduction of loan rates and the active promotion of alternative car sales programs would likely provide a timely solution to help car owners receive what they want without breaking the bank.