Russia expected to be third largest global market by 2012

Filed under: Etc., Euro, Earnings/Financials
Russia has long been included under the "emerging markets" umbrella that carmakers have been saying would lead to future industry growth. The economic fallout put an end to those predictions, with Russia suffering just as badly - and if you include the oil sector, some would say even worse - as any other economy. But even though sales are down, Frost & Sullivan predicts that Russia could rebound to be the world's 3rd largest auto market by 2012, behind the U.S. and China.

The prediction is based on steps Russia is taking to strengthen its automotive sector: it is increasing import tariffs and limiting the importation of used cars. The new importation law, similar to one recently passed by Bolivia, reduces the maximum allowable age of an imported car from 7 years to 5. Russia is also reviewing bank lending practices, since the money it flushed into the economy hasn't really had an effect on loan availability yet (not unlike the U.S.).

Lending and the size of the import tariff that Russia imposes seem to be the most important factors in making this prediction come true. But one thing not mentioned in Frost & Sullivan's forecast was oil. When the world economy gets off its knees, the price of oil is going to head for the moon again, and "expensive" oil means more Russians with money, and that could mean a return to more sales, provided the country's oil barons share the wealth.