www.pwc.ru/automotive Russian automotive market H1 2018 results and outlook Passenger cars | Light commercial vehicles | Trucks | Buses Special review: Car sharing in Russia September 2018 Contents 1 Overview of the Russian passenger car market 3 2 Overview of the Russian commercial vehicle market 9 3 Car sharing in Russia 13 4 Conclusions 17 5 About PwC 19 PwC 2 1 Overview of the Russian passenger car market PwC 3 Positive macroeconomic indicators supported the recovery of the Russian car market in Q1 2018 GDP growth rates and consumer price index (CPI) Average nominal RUB/USD exchange rate Q1 2015 – Q2 2018 Q1 2015 – Q2 2018 74.9 16.2 15.8 15.7 14.5 GDP against similar quarter last year, % CPI against similar quarter last year, % 65.9 8.4 66.1 64.6 7.4 6.8 5.8 63.2 63.0 63.0 4.6 61.9 4.2 3.4 58.6 2.6 2.2 2.4 58.4 56.8 57.1 58.0 -0.5 -0.4 -0.2 0.4 52.8 2.5 2.2 0.6 0.9 1.3 -1.5 -3.3 -2.6 -2.7 1Q ’15 2Q ’15 3Q ’15 4Q ’15 1Q ’16 2Q ’16 3Q ’16 4Q ’16 1Q ’17 2Q ’17 3Q ’17 4Q ’17 1Q ’18 2Q ’18 1Q ’15 2Q ’15 3Q ’15 4Q ’15 1Q ’16 2Q ’16 3Q ’16 4Q ’16 1Q ’17 2Q ’17 3Q ’17 4Q ’17 1Q ’18 2Q ’18 Source: Ministry of Economic Development of the Russian Federation; Rosstat Source: Central Bank of the Russian Federation Consumer confidence index Brent oil price behaviour, USD Q1 2015 – Q2 2018 Q1 2015 – Q2 2018 79.4 70.3 66.9 -8.0% -8.0% 63.6 -11.0% -11.0% 55.1 57.5 -15.0% -14.0% 56.8 -18.0% 49.1 52.8 -19.0% 48.4 49.7 47.9 -23.0% -24.0% 39.6 -26.0% -26.0% 37.3 -32.0% -30.0% 1Q ’15 2Q ’15 3Q ’15 4Q ’15 1Q ’16 2Q ’16 3Q ’16 4Q ’16 1Q ’17 2Q ’17 3Q ’17 4Q ’17 1Q ’18 2Q ’18 1Q ’15 2Q ’15 3Q ’15 4Q ’15 1Q ’16 2Q ’16 3Q ’16 4Q ’16 1Q ’17 2Q ’17 3Q ’17 4Q ’17 1Q ’18 2Q ’18 Source: Rosstat Source: Bloomberg PwC 4 In H1 2018, the passenger car market grew by 19% on the back of low sales volumes in H1 2017 Sales of Russian cars increased by Sales of foreign brands The share of imports in total sales In H1 2018, sales of new 20%. This was driven by higher assembled in Russia grew by 17%. in H1 2018 came to around 16%. passenger cars in Russia came demand for Lada cars, particularly for This is below the average growth rate As the scrappage fee increased and to 790,000 units, which is 19% the Lada Vesta and Lada Largus (sales in the industry. As of H1 2018, this the Russian rouble strengthened in more than in H1 2017 (665,000 of these models grew in 2018 by 43% segment accounted for around 62% of February-March 2018, sales of units). and 53%, respectively). UAZ total new passenger car sales. imported passenger cars grew by 23% passenger car sales also increased, as in H1. The stable position and the demand for UAZ Pickup grew by competitiveness of foreign brands In monetary terms, the market 43%. At the same time, demand for assembled in Russia were largely demonstrated growth both in RUB other UAZ models dropped. facilitated by various state support and USD. In rouble terms, growth was programmes. higher (23% vs 19%), as the rouble was weaker in H1 2018 than in H1 2017. Passenger car Sales,* thousand cars Sales,* RUB billion Sales,* USD billion categories (exclusive of Jan-June Jan-June Jan-June Jan-June Jan-June Jan-June Change Change Change LCV) 2018 2017 2018 2017 2018 2017 Domestic brands 173 144 20% 105 83 26% 2 1.4 23% Foreign car models 490 418 17% 585 495 18% 10 8.6 15% assembled in Russia Imported new cars 127 104 23% 400 311 29% 7 5.4 25% TOTAL 790 665 19% 1,090 889 23% 18.3 15.4 19% * Passenger car shipments Source: AEB, Russian Federal Customs Service, Autostat, PwC analysis PwC 5 Managing localisation and developing in-house financing programmes are now high priorities for car manufacturers as they seek to maintain their competitiveness Key trends in the Russian passenger car market in H1 2018: Volume of passenger car sales for selected brands, H1 2018* In 2018, government support of Before the scrappage fee 180 the car market scaled down as the increase, the imported car 160 Lada market gradually started to grow segment showed growth from 1 140 naturally. Still, in July 2018, a April 2018. The top three largest 120 KIA decision was taken to extend the imported vehicles are Toyota, 100 Hyundai subsidised car loan and car leasing Mercedes-Benz and Lexus. Together, 80 Renault programme through 2020. In they account for around 45% of total 60 Toyota VW Nissan (19%) growth Market Skoda addition, car loan subsidies were imports. 40 increased for the Far Eastern Federal Chevrolet Ford BMW Mazda For the first time since 2015, the 20 Mercedes-Benz District to promote sales of cars Lexus premium segment demonstrated Sales cars 2018, H1 in thousand 0 assembled in Russia. a positive trend, growing by 5.5% -5 0 5 10 15 20 25 30 35 In light of reduced government up to 70,900 cars, while its share Change in sales for H1 2018 compared to H1 2017 support, many car producers are continues to shrink and makes up 9%. continuing to promote offers Many strong performers in H1 2017 * Mitsubishi is in top 15 but not represented in the diagram due to the sales growth at the level of 131% such as trade-ins, soft lending, (such as Jaguar, Volvo, Jeep, Cadillac Source: AEB, PwC analysis operational leasing and leasing for and Infiniti) showed a negative trend individuals. in H1 2018, while Mercedes and Lexus Change in the passenger car market share for selected brands reversed their downward trend Market share Change in Brand towards growth. H1 2018, % H1 2017, % market share In H1 2018, the SUV and B Lada 20.8% 20.4% KIA 14.1% 12.8% segments continued to show the Hyundai 11.0% 10.5% largest sales volumes, accounting Renault 8.8% 9.1% for 81% of all new passenger vehicle VW 6.1% 6.0% sales. Toyota 6.0% 6.5% Nissan 4.7% 5.3% Skoda 4.6% 4.3% Ford 2.6% 2.8% Mitsubishi 2.5% 1.3% Mercedes-Benz 2.3% 2.6% BMW 2.2% 2.2% Chevrolet 1.8% 2.2% Mazda 1.8% 1.7% Lexus 1.5% 1.6% Source: AEB, PwC analysis PwC 6 Passenger car sales growth is expected to slow in H2 2018, and further market development will be driven by the macroeconomic environment Factors that may contribute to Factors that will drive sales In the optimistic scenario for slower sales growth in H1 2018: growth in H1 2018: 2018, sales of new passenger cars in Russia may grow 14% • Worsened macroeconomic • Higher demand for cars by the year- and reach 1.68 million cars. environment and increased volatility end prior to the VAT increase up to of the national currency 20% from 1 January 2019 In the baseline scenario, sales in this segment will grow 12%, • Increased scrappage fee reaching 1.65 million cars. • Reduced government support of the The outcome will mainly depend car industry on macroeconomic conditions. • Cancelled benefits for imported components and more stringent requirements for potential parties to special investment contracts New car market forecast, thousand cars (exclusive of LCV) 2018 2018 2017 Passenger car categories (baseline (optimistic (actual) forecast) forecast) Domestic brands 323 361 367 Foreign car models assembled in 897 1,022 1,040 Russia Imported new cars 255 266 270 TOTAL 1,475 1,648 1,678 Source: PwC analysis PwC 7 In the next five years, the passenger car market will grow moderately New passenger car market outlook for Russia, 2018-2022, million cars Forecast period 2.74 2.76 2.61 2.48 CAGR*=6% 2.37 2.34 2.1 12% 14% 2.04 1.96 1.86 1.8 1.78 1.65 1.68 1.49 1.47 1.4 1.37 1.31 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 2021 2022 *CAGR: Compound annual growth rate Optimistic scenario Source: PwC analysis Baseline scenario PwC 8 2 Overview of the Russian commercial vehicle market PwC 9 Cancellation of government support programmes could hinder market development Forecast for LCV sales, thousand cars The light commercial vehicle (LCV) segment includes vehicles with a gross weight of up to 3.5 tonnes. 174 CAGR = 6% In H1 2018, the light commercial vehicle market grew 5%, with 166 165 52,900 units sold. Citroen (+65%), Peugeot (+60%) and Ford 141 133 135 133 (+59%) led in incremental sales growth. 122 121 108 117 The Russian commercial vehicle market is dominated by the 91 92 93 national brands GAZ, UAZ and Lada, with a total share of 70%. However, the leading Russian brands lost their combined market share (6.6% down versus the same period in 2017).