skoda hyundai kia lada nissan land rover toyota uaz mitsubishi lifan change in sales in 2016 vs 2015...

Russian passenger car and commercial vehicle market2016 results and outlook

February 2017

www.pwc.ru/en/automotive.html

PwC

Table of contents

1 Overview of the Russian passenger car market 3

2 Overview of the Russian commercial vehicle market 11

3 Export potential of Russian vehicle manufacturers 15

4 Conclusions 19

5 About PwC 21

February 2017Russian passenger car and commercial vehicle market: 2016 results and outlook

2

PwC

Overview of the Russian passenger car market


3

PwC

By the end of 2016, the Russian economy began to stabilise

Russian passenger car and commercial vehicle market: 2016 results and outlook

4

February 2017

Overview of the Russian passenger car market | Overview of the Russian commercial vehicle market | Export potential of Russian vehicle manufacturers | Conclusions | About PwC

4Q ’16

5.8%

3Q ’16

-4.3%

2Q ’15

15.8%

-4.6%

1Q ’15

16.2%

-2.2%

4Q ’14

9.6%

0.4%

3Q ’14

7.7%

0.9%

6.8%

-0.4%

2Q ’16

7.4%

-0.6%

1Q ’16

8.4%

-1.2%

4Q ’15

14.5%

-3.6%

3Q ’15

15.7%

2Q ’14

7.6%

0.7%

1Q ’14

6.4%

0.6%

CPI as compared to the same quarter of the previous year, %

GDP as compared to the same quarter of the previous year, %1Q ’15

63.2

4Q ’14

47.6

3Q ’14

36.2

2Q ’14

35.0

4Q ’16

63.0

3Q ’16

64.6

2Q ’16

65.9

1Q ’16

74.9

4Q ’15

66.1

3Q ’15

63.0

2Q ’15

52.8

35.1

1Q ’14

4Q ’14

-32.0%

-18.0%

3Q ’14

-7.0%

2Q ’14

-6.0%

1Q ’14

-11.0%

-26.0%

2Q ’15

-24.0%

3Q ’15 4Q ’15

-30.0%

4Q ’16

-18.0%

-23.0%

1Q ’15

-19.0%

2Q ’16 3Q ’16

-26.0%

1Q ’16

51.949.2

2Q ’16 3Q ’16 4Q ’16

46.236.8

4Q ’15 1Q ’16

43.8

65.3

51.6

3Q ’151Q ’15 2Q ’15

56.9

1Q ’14

101.3109.9

2Q ’14 4Q ’143Q ’14

71.1

107.7

GDP growth rates and consumer price index (CPI)1Q 2014 – 4Q 2016

Average nominal exchange rate of the rouble to US dollar 1Q 2014 – 4Q 2016

Consumer confidence index 1Q 2014 – 4Q 2016

Brent oil price, USD1Q 2014 – 4Q 2016

Source: Rosstat

Source: Ministry of Economic Development of the Russian Federation, Rosstat

Source: Bloomberg

Source: Central Bank of the Russian Federation

PwC

Following the results of 2016, the sales of new passenger cars1

in quantitative terms dropped by 12%

2016 became the fourth year in succession for the Russian market to demonstrate a drop in sales; however, as compared to the previous year, the drop rates decreased (12% reduction in quantitative terms in 2016 compared to 36% in 2015).

In spite of the fact that many car manufacturers faced a decrease in sales compared to the previous year, some of them showed a growth in sales month-over-month, which was particularly notable in 4Q 2016. Among the sales volume leaders, LADA, Hyundai and Renault showed the best positive dynamics with an increase in their December sales by 18%, 12% and 17% respectively, as compared to December 2015.

Government incentive programmes substantially supported the market. One of the most popular programmes is a subsidised car loans programme. According to the Ministry of Industry and Trade, in 2016, under the programme, 324,000 passenger cars were sold, while 270,000 were planned. Thus the plan was exceeded by 20%.

In monetary terms, in 2016 the passenger car market remained almost on the same level as in 2015, despite the drop in sales in quantitative terms.

Against the background of low sales of new cars, there is an ongoing growth of demand for used cars. Presently, dealers are actively developing this line. According to the Autostat agency, following the results of 2016, the volume of the Russian market of used cars is 5.19 million cars, which is 6% higher than the previous year.


5

February 2017

* Shipment data exclusive of light commercial vehicles.Source: AEB, RF Federal Customs Service, PwC analysis

Passenger car groups (exclusive of LCV)

Sales*, thousand units Sales*, RUB bn Sales*, USD bn

Jan-Dec Jan-DecChange



2016 2015 2016 2015 2016 2015

Domestic brands 284 288 -1% 108 143 17.8% 2.5 2.3 8%

Foreign brands

assembled in

Russia

754 842 -11% 1,058 974 8.7% 15.8 15.9 -1%

New imported

cars

273 361 -24% 555 663 -16.3% 8.3 10.8 -24%

TOTAL 1,311 1,491 -12% 1,781 1,779 0.1% 26.5 29.0 -9%


PwC

Among the leaders of the growth in sales in 2016 there are brands offering new or updated models

In 2016, some of the top 20 brands in the volume of sales of passenger cars in the Russian market showed a positive growth in sales including Lexus, Lifan, Ford, Skoda and BMW.

The leader of the growth in sales among the top-20, Lexus, was successful in 2016 due to a renovation of its product line and development of the dealer network.

A positive growth in sales of Chinese manufacturer Lifan was due to the implementation of financial programmes and promotional programmes enabling the purchase of cars with maximum benefit, as well as a popular product range including crossovers.

In 2016, Ford finished a complete renovation of its product line for the Russian market, which, along with a well-balanced price policy, helped it strengthen its positions.

The attractiveness of Skoda for consumers was also mainly due to the attractive product line. In addition, the company is anticipating an even greater growth in sales in 2017, as this year a new crossover Skoda Kodiaq will be launched, as well as the updated Skoda Octavia.

The sales volume of BMW remained practically the same as in 2015 with a slight growth in sales. Measures for the reduction of a financial load on dealer centres taken in 2016, investments in the enhancement of the quality of all processes, and attractive credit programmes offered by BMW Bank contributed to the stable development of the company in the Russian market.


6

February 2017

The volume and growth of passenger car sales of some brands in 2016

50%20%-60% -50% -40%

125

-30%

0

25

50

75

100

30%

300

40%

275

225

200

175

150

250

10%0%-10%-20%

Mazda

Sa

les v

olu

me

in

20

16

, th

ou

sa

nd

un

its

LexusBMW

Chevrolet Mercedes-Benz FordSkoda

Hyundai

KIA

Lada

Nissan

Land Rover

Toyota

UAZMitsubishi

Lifan

Change in sales in 2016 vs 2015

Datsun Audi

VW

Renault

Mark

et

do

wn

turn

(-12%

)

Source: AEB, PwC analysis

Change in the passenger car market share of some brands

Brand Market share, 2015 Market share, 2016 Change in market share

Lada 17.6% 19.7%

KIA 11.0% 11.4%

Hyundai 10.8% 11.0%

Renault 8.0% 8.9%

Toyota 6.6% 7.1%

VW 5.3% 5.7%

Nissan 6.1% 5.4%

Skoda 3.7% 4.2%

Ford 2.3% 2.8%

Mercedes-Benz 2.7% 2.7% =

Chevrolet 3.3% 2.3%

BMW 1.8% 2.1%

UAZ 1.8% 2.0%

Lexus 1.4% 1.8%

Mazda 1.8% 1.6%

Audi 1.7% 1.6%

Datsun 2.1% 1.4%

Lifan 1.0% 1.3%


PwC

In 2017, the extention of the traditional state support programmes and introduction of new more target-oriented measures is planned

Source: List of measures aimed at providing the stable social and economic development of the Russia in 2017, dated 19 January 2017, PwC analysis


7

Anticipated Russian car industry support programmes in 2017

Programme Financing Expected outcome

Subsidies to Russian organisations for partial compensation of expenses connected with the manufacturing of wheeled vehicles

RUB 17.5bn Providing for the additional manufacture of 250,000 vehicles and the preservation of jobs in car manufacturing companies and related sectors

Programmes including First Car, Family Car, Russian Tractor, Russian Farmer, Private Business, the support of sales of natural gas-engine vehicles and public city electric transport, the purchase of school buses and ambulance cars

RUB 17.4bn Sales of 90,720 cars in 2017

Subsidising wheeled vehicles leasing RUB 10bn Sales of 41,500 cars in 2017

Compensation for some expenses for interest payments on the credits received for the implementation of investment projects, and payment of coupon profit of bonds issued for the same purposes

RUB 7.4bn Compensation for some expenses for the servicing of investment credits of more than 32 car manufacturers and car part manufacturers due to a degradation of crediting terms

Subsidies to Russian credit organisations for the compensation of a shortfall in income from credits granted by Russian credit organisations in 2015–2016 to individuals for the purchase of cars

RUB 7.0bn Sales of 270,000 cars

Subsidies to Russian credit organisations for the compensation of a shortfall in income from credits granted by Russian credit organisations in 2015–2017 to individuals for the purchase of cars (2017 liabilities)

RUB 3.0bn Sales of 350,000 cars in 2017


PwC

New car market is expected to see growth in 2017

In 2017, sales of new passenger cars in Russia could grow 7% and reach 1.4 million cars.

One of the main factors to be considered when forecasting the volume of car sales in Russia in 2017 is the forecasted crude oil price. According to GI, the average Brent crude oil price amounted to USD 43.3 per barrel following the results of 2016, while in 2017, according to a consensus forecast by Bloomberg, the price could grow to USD 55 per barrel, which is to promote the sales of new cars.

The consumer confidence level will also influence the market development. Following the results of 2016, the consumer confidence index is still quite low (-18% in 4Q 2016); however, there is a positive dynamic to be observed.

The implementation of the state-demanded promotion measures in the volume stated will also give material support to the Russian car market.


8

February 2017

Source: PwC analysis

Passenger car groups(exclusive of LCV)

2016(actual shipment)

2017 (forecast)

Change

Domestic brands 284 300 6%

Foreign brands assembled in Russia

754 810 7%

Imported cars 273 290 6%

The market as a whole 1,311 1,400 7%

New car market forecast, thousand cars (exclusive of LCV)


(*) Dealer sales data, excluding light commercial vehicles (LCV).

PwC

Forecast period

Long-term development of the Russian car market will depend on the economic situation in Russia and on measures to support supply and demand in the car market

According to the current forecast, in 2017, the new passenger car market is expected to grow by about 7%. The average annual market growth rate in 2016-2021 will be about 11%.

Forecast for the new passenger car market in Russia, 2017-2021, million units


9

February 2017

2021

2.18

2020

2.07

2019

1.94

2018

1.74

20172008

2.74

2007

2.37

2006

1.80

2005

1.40 1.41

2016

1.31

2015

1.49

2014

2.34

2013

2.61

2012

2.76

2011

2.48

2010

1.78

2009

1.37

11%

55

Crude oil price forecast, USD/barrel (the crude oil price forecast is based on a consensus forecast by Bloomberg).



PwC

57%54%

50%45%

39%36%39%

Forecast period

Considering the car manufacturers’ plans for increasing the productioncapacities in Russia and the current market forecast, the capacity utilisation isexpected to reach 57% by 2021

Following the results of 2016, the production of new passenger carsin Russia reduced by 7.4% and amounted to 1.1 million cars.

Considering that the current production capacities of Russian andlocalised car manufacturers amount to about 3.1 million cars peryear, following the results of the year, the production capacities wereutilised by 36%.

Presently, several foreign car manufacturers are preparing to startmanufacturing their cars in the territory of Russia.

Particularly, within the next five years, the production capacities arescheduled to be increased by 0.2 million cars to 3.3 million cars. Thisis due to the anticipated opening of three car plants:

– Great Wall in Tula region (150 thousand cars/year);

– Lifan in Lipetsk region (60 thousand cars/year);

– Mercedes-Benz in Moscow region (25 thousand cars/year).

According to the forecast based on the forecasts of sales, export andimport of passenger cars in Russia, in 2017 the production ofpassenger cars in Russia is to grow by 7%, reaching 1.2 million cars. In the next few years, the production volumes are expected torecover, reaching 1.8 million cars by 2021, providing there are noexternal shocks.

2016

3.1

1.1

2.0

2015

3.1

1.2

1.9

3.3

1.6

1.6

2018

3.3

1.5

1.8

2017

3.1

1.2

1.9

2021

3.3

1.8

1.4

2020

3.3

1.8

1.5

2019

New passenger car production volume in Russia, million units

Unutilised production capacities, million units

Utilisation of production capacities


New passenger car production volume in Russia, 2017–2021


PwC

Overview of the Russian commercial vehicle market


11

PwC

Forecast period

The gradual recovery of the economy and state support have a positive influence on the category of light commercial vehicles

The category of light commercial vehicles comprises vehicles with a gross vehicle weight of up to 3.5 tonnes.

Among the 2016 leaders, the following brands showed a growth in sales: Volkswagen (51%), Hyundai (30%), Ford (17%), Lada (11%), GAZ (9%), and IVECO (9%).

In 2017, the total LCV sales volume is expected to grow by 5%, reaching 97,000 vehicles.


Forecast of LCV sales, thousand units


GAZ 41.5% 45.1%

UAZ 21.9% 20.3%

Lada 7.6% 8.4%

Mercedes-Benz 9.6% 7.1%

Ford 4.6% 5.4%

Volkswagen 3.3% 5.0%

Fiat 4.0% 2.2%

Hyundai 1.3% 1.7%

Peugeot 1.5% 1.3%

IVECO 1.1% 1.2%

Other 3.5% 2.3%

+0.3%

20212016 20182017 2020201920152014201120102009 20132012

62 63 65

56

65

Crude oil price forecast, USD/barrel (the crude oil price forecast is based on a consensus forecast by Bloomberg.The main factors influencing the market of light commercial vehicles:

During 2016, some of the important indices grew, including oil price, which increased from USD 34.7/barrel in the beginning of the year to USD 56.82/barrel at the year end, the consumer confidence index, which improved from –30 to 18%, and the national currency exchange rate, which grew from 72.9 RUB/USD to 60 RUB/USD.

Various state support measures, i.e. fleet renewal, concessional lending, industrial subsidies, continued subsidising of the purchase of ambulances and emergency care cars.

Source: Autostat, PwC analysis


12


109109105104979392

141

165174

166

122

91

PwC

Forecast period

In 2016, the growth of sales in the truck segment was largely driven by deferred demand and government support

The truck market includes medium (from 3.5 up to 16 tonnes) and large (more than 16 tonnes) commercial vehicles.

Among the top ten brands of trucks, the following showed a growth in sales compared to the results from the previous year: KAMAZ (15%), GAZ (3%), Ural (2%), MAN (20%), ISUZU (0.2%) Mercedes-Benz (4%), NEFAZ (29%) and Volvo (60%).

In 2017, the total truck sales volume is expected to grow by 5%, reaching 56,000 vehicles.

Truck sales forecast, thousand units



KAMAZ 34.3% 37.9%

GAZ 13.8% 13.6%

MAZ 7.1% 6.2%

Ural 5.1% 5.0%

SCANIA 5.0% 4.7%

ISUZU 4.9% 4.7%

MAN 3.6% 4.2%

Mercedes-Benz 3.9% 3.9% =

NEFAZ* 2.9% 3.6%

Volvo 2.1% 3.2%

Other 17.3% 13.1%

2018 2019 20212020

+4%

2009 2010 2013 201720152011 201620142012


13

The main factors influencing the truck market:

There has been a decrease in sales since 2012, and companies will have to renew their fleets realising the so-called deferred demand accumulated during the previous years.

The state support measures including fleet renewal programmes, concessional lending, industrial subsidies, etc.

The growth of crude oil prices from USD 34.7/barrel in the beginning of the year to USD 56.82/barrel at the year end coupled with the improvement of the consumer confidence index from –30 to –18%.

The increase of transport service costs including credit rates, increased rates of fully comprehensive motor insurance (KASKO) and compulsory third-party insurance (OSAGO), the necessity to install tachographs and ERA-GLONASS sensors, and the increase of Platon system rates.



9182

7263

565351

88

111

129

111

60

41

* NEFAZ produces trucks based on the KAMAZ chassis. Reference of the car depends on designation in VIN-code. If designation is absent, the car is referenced according to the name to KAMAZ.

PwC

Forecast period

Fleet renewal, preparation for big sports events and state purchase of buses provide for stable demand in the category

The bus segment includes all transport vehicles designed for the transportation of passengers and baggage that are equipped with more than eight seats exclusive of the driver’s seat, except when the transport vehicles fall within the category of light commercial vehicles.

Of all the category leaders, only Marcopolo showed a drop in sales in absolute terms (–29%) and IVECO (–18%); other brands increased the volume of sales compared to 2015.

In 2017, the total bus sales volume is expected to grow by 8%, reaching 11,200 vehicles.

Bus sales forecast, thousand units

Source: Autostat, PwC analysisThe main factors influencing the market of buses:

900 million roubles are to be allocated, in addition to the school bus update programme amounting to 3 billion roubles. The natural gas-engine transport support programme is extended and the bus fleet still needs to be updated.

As part of the preparation for the 2017 Confederations Cup and 2018 World Cup, the programme for expanding the bus fleets in the World Cup host cities continues. About 3,000 new buses are to be purchased under the programme.

The development will be restricted by the growth in the number of private cars and the growth in competition with other types of public transport.

16.4

2010 2011

12.4

2009 2012

17.1

2013

15.2

2014

11.2

2015

9.0

2016

10.4

2017

11.2

2018

11.6

2019

11.7

2020

12.4

2021

13.6+15%

10.3


PAZ 60,7% 57,4%

LIAZ 11,8% 18,1%

MAZ 6,0% 8,0%

NEFAZ 6,8% 5,8%

KAVZ 3,4% 3,6%

Volgabus 3,1% 2,7%

Marcopolo 1,3% 0,8%

IVECO 0,8% 0,6%

YUTONG 0,1% 0,5%

King Long 0,3% 0,5%

Other 5,8% 2,1%



14


PwC

Export potential of Russian vehicle manufacturers


15

PwC

Adapting to local conditions and a proper investment policy will determine the export potential of Russian car manufacturers



16

In Russia, there is under-utilisation of production capacities; thus exporting cars to foreign markets can become one of the sources for partial utilisation of free capacities. The realisation of an export strategy will enable car manufacturers not only to provide for the additional utilisation of their capacities but also to improve brand recognition and develop their client base.

The main competitors of Russian car manufacturers in the developing markets are Asian manufacturers, primarily, Chinese, which have a considerable price advantage over other market participants. Offering products with expressed technological advantages as compared to the products of Chinesebrands while preserving an optimal price–quality ratio can help improve the potential of Russian manufacturers in export markets.

Presently, the products of Russian car manufacturers are likely to be popular in the developing markets, in which there are high car market growth rates, a demand for medium and low price cars, and comparatively favourable market access conditions.

It is not only necessary to build a sales network but also to provide for the availability of spare parts and maintenance services. A substantial share of many developing markets belongs to unofficial dealers and service centres, with which it is also necessary to compete.

Choosing a strategy to enter the developing markets depends on the capabilities of a manufacturer, its ultimate goals and the particular features of the export market. When entering a new market, companies can choose indirect export when products are sold through independent intermediaries, or direct export when a company performs export operations independently, i.e. establishes a trade representative office or engages foreign distributors. An important component of success in foreign markets is the availability of appropriate partners and contractors. Irrespective of the strategy selected, the solution to the task generally requires investment and a good assessment of the potential outcome.

Tariff and non-tariff foreign trade regulation methods used in different countries can hinder export development; however, they can be partially removed if the state and car manufacturers join together in their efforts (see more details below).

PwC

When entering export markets, Russian car manufacturers face a number of tariff and non-tariff foreign trade regulation methods


17

February 2017

Tariff regulation methods Non-tariff regulation methods

• Tariff regulation methods imply the necessity of paying customs duties when importing cars into a country's territory.

• In many developing countries including BRIC* and ASEAN* member-states there are high import duties limiting export from other countries, which is mainly aimed at protecting local car manufacturers and promoting the localisation of production. Thus, import duty on a passenger car in India and Thailand is 60% and 80%, respectively.

• Non-tariff regulation methods imply the application of foreign trade regulation tools different from customs duties.

• The most popular regulation methods are licensing and quantitative restrictions of products (i.e. in Algeria and Ecuador), compulsory certification of products to confirm the compliance with technical and ecological standards applicable in a country (i.e. Euro-6 in the EU), and providing export subsidies.

• Among the measures able to ease the regulatory mode and have a positive impact on the volume of export by Russian manufacturers there are execution of free-trade agreements and special intergovernmental agreements.

• Thus, for instance, to extend the economic relations, a free-trade agreement between the Eurasian Economic Union (EEU) and Vietnam was concluded on 5 October 2016. One of the main provisions of the agreement deals with a gradual reduction of import duties for passenger cars manufactured in Russia and other EEU countries from 50–70% to 0% and from 17% to 0% for trucks within ten years.

• Also, in October 2016, a Russian-Vietnamese intergovernmental protocol on the support of motor vehicles in the territory of Vietnam came into force, providing authorised companies (Groups GAZ, KAMAZ and Sollers) with the right to import motor vehicles and vehicle sets to the country within the quota limits.

• Non-tariff regulation methods often result in the need to adapt the products of car manufacturers to local specifics, which, in turn, requires substantial investment and optimisation of operation costs.

• Therefore, it is very important for car manufacturers to track global car production trends to consider all present and future requirements of car products.

• Thus, Russian car manufacturers have the potential to expand their presence in export markets; however, to preserve and strengthen their competitive ability, it is necessary to introduce technologies and innovations and maintain quality standards.

(*) BRIC – Brazil, Russia, India, China; ASEAN (Association of South-East Asian Nations) – Brunei, Vietnam, Indonesia, Cambodia, Laos, Malaysia, Myanmar, Singapore, Thailand, Philippines.



PwC

The main development lines with export potential of Russian car manufacturers are aimed at developing financial and non-financial support tools

In November 2016, a passport of the priority project International Cooperation and Export in Industry was approved, including a set of the industrial sector’s state support measures. Particularly, the support measures will be focused on four sectors, i.e. car production, agricultural machinery industry, railway machinery industry and aircraft industry. The project is aimed at creating conditions for the sustainable growth of the export of Russian industrial non-resource products.

It is expected that the amount of funds in the federal budget earmarked for priority sectors (including the manufacturing of automobiles, agricultural machinery, railway machinery, and aircraft) could reach RUB 70bn over the period of 2017-2019.


18

February 2017

Source: passport of the priority project International Cooperation and Export in Industry, protocol dated 30 November 2016.

The main car production support programmes for 2017-2019

Non-financial export support measures Financial export support measures

• Compensation of expenses for the transportation of exported products, certification of products in foreign markets and export R&D activities (homologation of products, design and development of new export products);

• Compensation of expenses for the registration of intellectual property objects in foreign markets;

• Assistance in the conduction of exhibitions and trade fair activities;

• Subsidising the creation of an aftersales service system;

• Compensation for some expenses for participating in the activities of international organisations in order to protect the interests of the national car industry.

• Crediting foreign buyers of the products with a subsidisedinterest rate through Vnesheconombank and Roseximbank.


PwC


19

February 2017

Conclusions

PwC

Conclusions

In 2016, falling rates in the Russian economy slowed, but the consumer confidence index still remains at a low level.

In 2016, the sales of new passenger cars in quantitative terms dropped by 12%. In rouble terms, the market remained practically unchanged while in dollar terms it dropped by 9%.

Among the market leaders in the growth of sales in 2016 there are brands offering new or updated models.

In 2017, the extention of the traditional state support programmes and introduction of new more target-oriented measures is planned.

In 2017, growth of the new passenger car market is anticipated in quantitative terms up to 1.4 million cars. According to the forecast, by 2021, the new passenger car sales volume will reach 2.18 cars per year, providing there are no external shocks.

The total new car production volume in Russia dropped by 7.4% in 2016. Considering the car manufacturers’ plans for increasing the production capacities in Russia and the current market forecast, the capacity utilisation is expected to reach 57% by 2021, reaching a production volume of 1.8 million cars.

The sales of light commercial vehicles in 2016 actually remained at the level of the previous year, amounting to 93,000 vehicles. In 2017, the total LCV sales volume is expected to grow by 5% to reach 97,000 vehicles. The gradual recovery of the economy and the state support have a positive influence on the category of light commercial vehicles.

Following the results of 2016, the truck market grew by 4% compared to the same period of the previous year amounting to 53,300 vehicles. In 2017, the total truck sales volume is expected to grow by 5% amounting to 56,000 vehicles. Among the main factors of growth in the next few years are the growing deferred demand and state-supported measures, while a constraining factor is the increasing vehicle maintenance cost.

Following the results of 2016, the bus market grew by 15.4% compared to 2015 and amounted to 10,400 buses. In 2017, the growth is expected to be 8% with the sales reaching 11,200 buses. Fleet renewal, preparation for big sports events and the state purchase of buses provide for a stable demand in the category.

Russian car manufacturers have the potential to expand their presence in export markets; however, to preserve and strengthen their competitive ability, it is necessary to introduce technologies and innovations and maintain quality standards.



20

PwC

About PwC


21

PwC

PwC international experience of services to car industry companies


• In 2016, PwC was named the strongest brand in the Business for Business category by Brand Finance and was ranked among the world’s top ten most influential global brands in the annual rating.

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We are proud that experts recognise us as leaders in our field.

Facts about PwC:

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among auditing organisationsin forensic;1

in the rating of top 50 consulting firms in the field of financial consulting for 2016;2

in the rating of top 50 consulting firms for 2016.5


22

PwC

PwC experience of rendering services to car industry companies


23

A non-exhaustive list of PwC clients in Russia representing

the car industry

Avilon Automobile Group Peugeot Citroen Rus

Asia Auto Ust-Kamenogorsk* Pirelli Tyre Russia

Automotive Glass Alliance Rus* Porsche Russland*

BMW Renault

Bosch Rexroth* ROLF*

Brembo Russia Scania-Rus*

Bridgestone CIS SKF*

Brose Togliatti Automotive* SOLLERS*

Volvo Vostok* Sollers-Bussan*

Goodyear Russia* SP BUSINESS CAR*

DAIMLER KAMAZ RUS Tenneco Automotive Volga*

Daf Trucks Rus Toyo Tires Rus

JCB Russia Toyota Boshoku*

Johnson Controls* Toyota Tsusho Technics*

Inchcape Holding* Volkswagen Group Rus*

Caterpillar Eurasia* Ford Motor Company*

Caterpillar Tosno*Ford Sollers Automotive Components*

KIA Motors Rus Ford Sollers Elabuga*

Cominvest-AKMT Ford Sollers Holding*

Cordiant* Faurecia Group*

Magna Automotive Holding Fuyao Glass Rus*

Mazda Motor Rus Hyundai Motor Manufacturing

MAHLE RUS* Hyundai Motor CIS

MAN Trucks and Bus Rus* Hyundai Steel Rus*

Mercedes-Benz RUS Hyva Russia*

Mitsubishi Corporation Honda Motor

MMC Rus Zeppelin Russland*

NVH RUS Schmitz Cargobull Russland*

Nissan Manufacturing Rus Unipress Rus

Norauto Rus* Jaguar Land Rover

* - auditing clients.

The market share of audit services rendered to car industry companies in Russia(by the number of clients)49 companies included in the rating

PwC

27%PwC

Source: PwC; rating Expert-600, October 2015

The market share of PwC in all types of services rendered to car industry companies in Russia (by the number of clients) 49 companies included in the rating

PwC

65%PwC


PwC

We offer a wide range of services to automotive companies

Market analysisand strategy development;

• analysis of market potential, key players and trends, analysis of a new product market prospects (feasibility study);

• elaboration of a company’s development strategyin the domestic market;

• development of a foreign markets access strategy;

• conducting financial and economical, tax and legal examination (due diligence) of partners and acquisition targets;

• assistance with fundraising, including the development of a business plan, evaluation of a pledge object and assistance in negotiations with partners and banks;

• M&A transactions support: search for buyers or acquisition targets, business value assessments and preparation of transaction documents.

Solutions to tax and customs issues

• finding ways to reduce the tax burden;

• procedure for accounting of operations typical for dealers, distributors and manufacturers of cars;

• regional tax breaks;

• matters of international taxation, matters connected with intercompany transactions including financing;

• support in tax disputes including in court;

• support of projects connected with industrial assembly regime;

• VAT consulting services (VAT refund, tax remissions, import and export operations);

• assistance in the organisation of a customs clearance process, assistance in the interaction with customs authorities and support in court.

Solutions to legal issues

• legal assistance in the development of structure and the establishment of production and trade companies in Russia and CIS including the preparation of corporate documents;

• legal support in the matters of establishment and operation of joint ventures;

• support of investment projects including the conclusion of investment agreements with public authorities;

• consulting and legal support in the matters of the construction of plants and other real estate issues;

• legal assistance in the creation of dealer networks and interactions with them, including the development of standards in the field of the selection of potential dealers and introduction of dealer financing programmes.

Fundraising

• audit of IFRS statements;

• consulting services for bringing management statements into compliance with the IFRS requirements;

• improving internal control systems

• preparation for IPO;

• financial modelling


24


PwC

We conduct automotive market research and understand all its trends


25

February 2017

For this purpose, PwC:

• Conducts detailed research devoted to the current state of the automotive industry and to development issues;

• Holds specialised seminars for our car industry clients on industry and business development matters;

• Participates in key industry events and activities;

• Sponsors key industry events and activities

PwC strives to be at the centre of events in the automotive industry and to offer the most relevant information and analysis to our clients.

Automotive M&A deals insights –first half of 2016

Reinventing the wheel: car industry potential development scenarios

Global research into information security trends for 2016: results of car industry companies survey

Auto industry trends in 2016

Driving value:automotive M&A insights

The cost of car ownership in Russia, 2016


Contacts

This presentation has been prepared for general guidance on matters of interest only, and does not constitute professional advice. You should not act upon the information contained in this publication without obtaining specific

professional advice. No representation or warranty (express or implied) is given as to the accuracy or completeness of the information contained in this publication, and, to the extent permitted by law, PwC, its members, employees

and agents accept no liability, and disclaim all responsibility, for the consequences of you or anyone else acting, or refraining to act, in reliance on the information contained in this publication or for any decision based on it.

PwC Russia provides industry-focused assurance, tax, legal and advisory services. Over 2,500 professionals working in PwC offices in Moscow, St Petersburg, Ekaterinburg, Kazan, Rostov-on-Don, Krasnodar, Voronezh, Novosibirsk,

Vladikavkaz and Ufa share their thinking, experience and solutions to develop fresh perspectives and practical advice for our clients.

PwC refers to the PwC network and/or one or more of its member firms, each of which is a separate legal entity. Together, these firms form the PwC network, which includes over 223,000 employees in 157 countries.

© 2017 PwC. All rights reserved.

Oleg MalyshevPartner, Deals Leader

Tel.: +7 (495) 967-6000E-mail: [email protected]

PwC Press Service in Russia:Marieta Khamkhoeva

Tel.: +7 (495) 967-6000 (ext. 2405)E-mail: [email protected]

Victoria SinichkinaSenior Manager, Corporate Finance, Advisory, Automotive

Tel.: +7 (495) 967-6000E-mail: [email protected]

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