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What To Do In An Economic Crisis? Buy A Car!

  • Tom Balmforth

Audi sales are on the rise in Moscow

Audi sales are on the rise in Moscow

MOSCOW -- With the ruble falling, the economy shrinking, and disposable incomes plunging, Oleg Borisov decided to...buy a luxury car?

Last month, the 36-year-old Moscow-based translator and his brother plonked down 1.5 million rubles for a brand new Audi-6. And they did so not in spite of Russia's economic woes -- but because of them.

“It was cheaper than anywhere else in the world,” Borisov said.

“We’d been putting off buying a car since summer -- just putting it off and putting it off. Then we started to get scared that everything would get more expensive and that we’d be too late. In the end, we made it just in time.”

The two reasons Borisov gave for his purchase -- that his new purchase was a bargain, and that the low prices wouldn't last -- explain why auto sales surged in Russia in November after falling for most of the year.

As the ruble fell to record lows, losing 40 percent since the start of the year, there has been a brief window of opportunity for consumers to get great deals before foreign auto dealers raised their prices accordingly. And if they didn't move fast, not only would the bargains disappear, but the cars would be priced way beyond many consumers' means.

The 1.5 million rubles Borisov and his brother spent for the Audi-6 in November were the equivalent of about $30,000. In Europe, the car would have cost about $45,000.

Selling Like Hot Cakes

Aleksei Shapkin, who runs an Audi dealership in the Russian capital, says sales at Rolf Group showrooms like his have jumped 47 percent in November compared to one year ago.

“The cars are selling like hot cakes," Shapkin said. “We haven’t seen a rush like this in ten years.”

Shapkin added, however, that prices may be hiked on Audis in the new year.

Some consumers got in on the bargains even before the November surge.

Aleksandr Rulev, 29, a finance director at a Moscow real estate company, spotted the impending ruble plummet in September. He realized banks would raise rates and so took out credit to buy a BMW X3. “It would now cost me 20 to 25 percent more as far I understand.”

Just two years ago, the Russian auto market had been tipped to soon overtake Germany's as the largest in Europe. Instead, it began to shrink in 2013 as interest rates rose and the ruble lost 9 percent against the dollar and euro.

The fall in sales continued through 2014 as Western sanctions on Russia began to bite and the ruble's fall got steeper.

Sergei Udalov, executive director of Autostat, which tracks car sales in Russia, said sales were down by 25 percent in August compared with August 2013 and 20 percent in September compared with September 2014. But in November, they surged to just one percent shy of 2013 levels.

Distorted price tags have also reportedly piqued the interest of Russia's neighbors as well. According to reports in Kazakh media, residents of northern Kazakhstan have been crossing the border into Russia in search of good deals on cars.

Chris Weafer of the Moscow-based consulting firm Macro Advisory described the surge as a "brief rally" that would not extend into next year after the adjustment of prices. He said last year’s downturn in the car industry was “an early warning indicator,” or harbinger of Russia's economic trouble today.

"All the indications are that this period [of surging car sales] will last very briefly and will take a downward turn," Weafer said.

Indeed, in a December 12 article, the mass-circulation daily “Komsomolskaya pravda” listed cars as one of the five habits Russians will need to give up as the economy worsens

“Cars are becoming a luxury again,” the daily wrote.

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    Tom Balmforth

    Tom Balmforth covers Russia and other former Soviet republics. He can be reached at balmfortht@rferl.org

     

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