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European carmakers need to counter Korean rivals in Russia

European automakers are losing ground in Russia, the country that is closest to their home bases of all the very promising so-called BRIC countries (Brazil, Russia, India and China).

They are lagging behind Korea's surging Hyundai-Kia, which has replaced General Motors as Russia's second-largest auto group by new-car sales after No. 1 AvtoVAZ, the domestic champion and maker of Lada cars.

Hyundai-Kia's Russian year-on-year sales increased 15.6 percent to 66,868 from January to May, according to the Association of European Businesses. The performance is remarkable in a total market that fell 5 percent to 615,665 units in the same period.

GM sales declined 23 percent to 53,753, counting Chevrolet, which is popular in Russia, and also Opel, Cadillac and Hummer.

Volkswagen group, Europe's biggest automaker with 20 percent of the EU's new-car market, trails AvtoVAZ, Hyundai-Kia and GM in Russia with sales down 3 percent in the first five months to 42,693, counting sales of its core VW brand, along with Audi, Skoda and Seat.

Fiat created Russian market leader AvtoVAZ from nothing in the late 1960s for the then-Soviet regime, but it hasn't helped the Italian company in the market. Fiat's five-month sales at 6,923 are behind BMW (8,065 units sold including Mini).

Russia came close to overtaking Germany's in 2008, but last year sales halved to 1.5 million units as the financial crisis hit hard in a market strongly dependent on consumer credit for car sales.

Nevertheless, Russia is set to rebound much quicker than the EU.

Morgan Stanley analysts predict that the Russian market will reach 2.7 million annual sales in 2012. Fiat sees the market at 3.1 million in 2014.

European automakers need to quickly counteract Hyundai-Kia's Russian success to avoid missing this large growth opportunity.

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