Why Automakers Love Russia

Posted by: Jack Ewing on March 05, 2008

Amid economic uncertainty in the U.S. and Western Europe, one bright spot for automakers is Russia. The nation’s energy riches are breeding more people with the wherewithal for both luxury and mass market cars, numerous auto execs told BusinessWeek at the Geneva auto show.

At the high end, Russia has become one of the most promising European markets for Toyota’s Lexus brand. In 2007 Russians bought about 13,000 Lexus cars, says Karl Schlicht, head of Lexus in Europe. That’s almost a quarter of Lexus’ European total. Russia will overtake Britain as Lexus’ strongest market in Europe by next year at the latest, says Schlicht. As a Porsche exec points out, Russia has the kind of buyers that premium carmakers need, namely wealthy people anxious to show off their success.

Mass market carmakers are also benefiting. Ford Motor Co. sold about 175,000 vehicles in Russia in 2007, up from just 4,000 in 2000. The company is also optimistic that models such as the new Kuga mid-sized SUV will sell well in Russia. “We’ll see some weakness in Western Europe balanced out by increasing strength in places like Russia,” says John Fleming, CEO of Ford Europe.