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. Last Updated: 07/27/2016

Study: $22Bln Spent on Cars in '05

bloombergAlthough the Russian car market is showing signs of slowing, the share of foreign models is still growing steadily.
By the end of this year, Russians will have splashed out $22 billion on cars, a 22 percent increase from 2004, according to a new report published by PricewaterhouseCoopers on Wednesday.

Although the Russian car market is showing the first signs of slowing down, the share of foreign models is still growing steadily, the global consultancy said.

"We are getting toward the top of the hill, but new foreign models are growing tremendously strong," Stanley Root, a PwC partner and the author of the report, said at a presentation.

This year, 1,720,000 vehicles are expected to be sold in Russia, 7 percent more than in 2004, Root said, citing preliminary data.

While new imports will account for 23.8 percent of total vehicles sold, domestically produced models look to slip to 48.8 percent, according to the report. The rest of sales will be accounted for by foreign models made in Russia, at 8.7 percent, and used imports, at 18.6 percent.

Russians' demand for foreign cars continues unabated. The number of second-hand foreign cars sold is set to hold steady at 320,000, despite a tightening of the customs regime. "You would expect a drop, but even a rather significant rise in customs tariffs hasn't had a result" on the import of used cars, Root said.

Overall, Russians will spend some $22 billion on cars, up from $18.2 billion last year, PwC said.

Sales of new imported cars are expected to jump by 36 percent to $10.2 billion this year, according to the report. In 2004, foreign car sales leapt 70 percent.

"As incomes continue to grow and credit schemes become more available, Russian consumers are swapping domestic models for foreign brands," said Valery Tarakanov, a spokesman for the Moscow-based Rolf chain of dealerships, which specializes in foreign cars.

The company's sales are so convincing that Rolf has recently scored a $350 million syndicated loan from Western banks to help it add 13 new dealerships to its seven existing ones, Tarakanov said.

Having decided that it cannot fight the allure of foreign autos, the government earlier this year lifted duties on key car parts in an attempt to get international carmakers to bring production to Russia.

The government has said it wants domestically assembled cars -- of both foreign and Russian pedigree -- to account for 75 percent of car sales by 2008.

Root cast doubt on that goal. "The big question remains whether the government is going to reach that target since the share of imports in unit terms has not changed considerably in the last four years."

That share is expected to be around 42 percent this year, a slight increase from last year's 36 percent, the company said.

Low-cost Chinese models with such outlandish names as Jelly and Dadi Shuttle are set to take a bigger bite out of the Russian market, said PwC, which estimated that up to 12,000 Chinese cars would be sold in Russia by year's end. Carmaker Great Wall will account for 90 percent of that number, Root said.

Korean, Japanese and American models typically dominate the foreign cars market in Russia, though PwC did not provide a sales breakdown by brand.