Russian car sales could total US$40 billion in 2011

…which is good news for Kwik-Fit’s Russian partner and other tyre retailers too. In February the Russia Trade and Industry Ministry forecasted a rapid recovery of the country's automotive market in 2011, supporting suggestions that Russia is once again on track to become the largest car market in Europe. What’s more this is likely to have a positive impact on those retail chains such as Kwik-Fit’s partnership with Russian Rolf Group, White Service.

“We expect growth in 2011 to be 14.8 per cent, reaching 2.19 million units [of cars and light commercial vehicles],” director of the ministry’s department for the auto industry Alexei Rakhmanov told the Interfax news agency. The ministry’s forecast is more cautious than the Association of European Businesses, which confirmed a 20 per cent growth forecast for 2011 earlier in February after sales shot up 72 per cent year on year in January to 127,564 units. Rolf Group, one of the country’s leading car dealers, forecasted sales of 2.23 million units in 2011. Rolf Group’s retail branch expects to sell more than 61,000 new cars in 2011, up 44 per cent from 2010.

But while Moscow leads the country in per capita car ownership, “the regions are the future for every distributor,” said Sergei Shchyorbinin, executive director of retail at Rolf Group. The company has 25 showrooms in Moscow and St. Petersburg, representing 10 of the leading international vehicle manufacturers. Rolf estimates that there are 307 cars per 1000 people in Moscow, but only 233 cars per 1000 people nationwide.

Shchyorbinin said the western part of the country has 56 per cent of the population and 75 per cent of the car dealerships, while the 44 per cent of Russians who live east of the Urals make do with only 25 percent of the dealerships.

The Kwik-Fit connection

So what does this mean for the tyre retail business? Rolf Group has been using “fast, universal and high-quality auto repair” as differentiators when promoting its White Service maintenance brand across the country. And just over a year ago in the middle of February 2010 Kwik-Fit announced that it was to enter into partnership with the Rolf group in order to deliver services.

Back then the target was to open 100 White Service outlets during 2010 (White Service was only established in December 2009). As of February 2011, the running total was 70 service stations run by partners in 46 cities.

By 2015, the White Service aims to have opened 450 new shops in “midsized cities” as part of the plan to expand into the regions and consolidate brand recognition as the “market leader in multi-brand, Western-style auto repair.” However it is worth pointing out that the 450 branch target is also a 10 per cent downward revision. At the launch Rolf Group said it wanted to expand into 500 branches within the same timeframe. This is significant because Kwik-Fit signed a 10-year cooperation deal as part of its deal with Rolf Group and the executives behind this agreement will no-doubt want to see results that meet or exceed expectations.

At the time of the announcement of the Russian cooperation last year Kwik-Fit representatives pointed out the attraction of the Russian market. In comparison with the UK, a larger proportion of Russian motorists choose premium tyres, and the climate drives demand for both winter and summer tyres, as in other northern European countries.
White Service centres are intended to initially follow a model similar to Kwik-Fit, with tyres, brakes and fixed price servicing being the main customer offering.

Chaotic market development

All of the government and Rolf Group’s predictions are set against what can only described as a somewhat chaotic background. During 2009, for example, the Russian market for various types of vehicle tyres (including industrial equipment, tractors and combined harvesters) totalled 33 million units, down a reported 36 per cent. CRIA published magazine, China Rubber reported last year that the 2008 figure was 51.4 million. The fall in value of these tyres was even steeper, down 40 per cent at 95.14 billion rubles (2008: 157.7 billion rubles).

For its part Kwik-Fit Group franchises currently operate in Algeria, Belgium, France, Hungary, Morocco, Netherlands, Senegal and Turkey as well as 595 owned branches in the UK.

Related news:

• Kwik-Fit Establishes Russian Tyre Retail Franchise Partnership

• Credit Crunch Takes a Bite Out of the Russian Bear

• Russian Tyre Imports Crash 8.6% in 1H 2009