From Bloomberg:
�I need a respectable car to visit clients and travel outside the city,� said the 41-year-old bank executive from the St. Petersburg area. �I earn enough money to do it with ultimate comfort on bad Russian roads.�
Skibar�s shift upmarket is a reflection of the growing class of wealthy consumers in the former communist country. Fueled by an economy based on Russia�s abundant natural resources, the number of households able to afford luxury goods is forecast to rise to 13 million by 2025 from 7 million in 2010, according to consulting company Capgemini.
Those growth prospects are prompting high-end carmakers to expand their presence in the country. Volkswagen AG (VOW)�s Porsche plans to double the number of dealers to 36 over the next six years. Audi is adding showrooms as it targets 30,000 car deliveries this year, double its sales from 2009. Bayerische Motoren Werke AG (BMW) will add about 20 outlets by 2018, a third more than today.
At the Moscow International Automobile Salon, which opens tomorrow and features more than double the exhibition space from the last show in 2010, BMW will introduce an updated version of its top-of-the-line 7-Series sedan. Daimler AG (DAI)�s Mercedes-Benz plans to present a high-performance AMG version of the GL SUV, and Porsche will show the 420-horsepower GTS variant of the Cayenne SUV.
$75 Billion Market
Russia is poised to surpass Germany as Europe�s largest auto market by 2014, with sales rising to 3.4 million vehicles, according to the Russian Industry Ministry. As more buyers choose upscale cars, total revenues for automakers will increase 19 percent to $75 billion this year, outpacing the 10 percent gain in vehicle sales, according to Russian market researcher Autostat.
Lada (AVAZ), Russia�s dominant brand, has been largely left out of the move upscale. The only domestic carmaker among the country�s 10 top-selling nameplates, Lada offers mostly low-end cars such as the Kalina compact and the Niva, a boxy 4X4 that dates from the Leonid Brezhnev era. Lada�s market share fell to 18 percent in the first half from 24 percent a year earlier.
Renault SA (RNO), the No. 2 brand in Russia in the first half, and its alliance partner Nissan Motor Co. (7201), agreed in May to raise their stake in Lada�s parent, OAO AvtoVAZ to 74.5 percent from 25 percent today. The group is aiming for combined market share of 40 percent by 2015 from 33 percent last year, though Lada will anchor the lower end of the lineup while more expensive cars will bear the foreign nameplates.
Growth Potential
BMW plans to open a new training center for employees and dealers in Russia next year and intends to expand its network of BMW and Mini outlets to 80 from 61 by 2018. The carmaker�s Rolls-Royce brand opened a second dealership in Moscow in July, making the Russian capital the second city, after New York, with more than one showroom.
�We�re continuing to invest in Russia because we believe in the Russian luxury market�s future growth potential,� said Ian Robertson, who heads sales for BMW.
Volkswagen is looking to catch up. Its Porsche sports-car brand is drumming up interest with a road show in Russia to encourage test drives. Bentley, the German automaker�s ultra-luxury nameplate, is featuring the Continental GT Speed, its fastest model ever, at the Moscow auto exhibition.
Biggest Potential
�Russia offers the biggest growth potential for the luxury-car segment worldwide,� said Jan-Henrik Lafrentz, Bentley�s finance chief. He expects the brand to double its sales there �in the near future� as it adds showrooms.
Nissan is also stepping up its high-end offerings in Russia. This summer, the Japanese carmaker began assembling the Infiniti FX SUV at its St. Petersburg factory, where it also makes the Nissan Murano SUV.
�The facility will focus on popular premium models with the highest profit margins,� said Dmitry Mikhailov, the plant�s director.
The expansion in Russia marks a sharp contrast to the European Union, where car sales are expected to decline 7 percent this year to the lowest level since 1995, according to the auto-industry association ACEA. That�s making a strong presence in Russia more critical for high-end carmakers to remain competitive.
Europe Offset
�Russia is starting to close the gap for us to Germany and the U.K. volume-wise,� said Doug Speck, sales chief for Volvo Car Corp. �We�ve taken the forecast for Russia up three times this year� and are now targeting sales of more than 20,000 cars there, at least 18 percent more than 2011.
The brand�s sales surged 50 percent in Russia through June, compared with an 8.2 percent slump in western Europe, according to data from industry associations.
The Russian boom is creating opportunities for dealers like Evgeny Voitenkov. The president of St. Petersburg-based Olymp Group, one of the oldest official Mercedes-Benz dealers in Russia, added Porsche to his portfolio three years ago after seeing that demand for high-end cars remained stable even when the economy contracted.
�The number of rich people is growing,� Voitenkov said.�Luxury cars sales will have a bright future in Russia.�
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