Russians are Using Porsches and Audis to Hedge the Ruble
In the face of increasingly stringent international sanctions, Russia’s automotive sector probably has never had it so good. Porsche, Audi, Lexus, and Mercedes vehicles have been selling as fast as dealers can put them out on the lot — but not necessarily because of a massive spike in personal wealth. It’s more to do with the fact that due to the global macroeconomic environment, a Porsche Cayenne will hold its value better than the Russian ruble will.
The currency has lost nearly 20% of its worth against the U.S. dollar since November 1, and with it, the decline has taken a severe bite out of the savings of the Russian citizens. Subsequently, Russians are changing their savings into tangible goods — notably, luxury cars.
Porsche reported a 55% sales boom last month in the country, and Lexus topped the German marque with a leap of 63% year-over-year. It was intense enough that Lexus actually had to bring in additional staff members to help handle the influx of buyers. Remember that these are not holiday-special TVs or iPads — these are $50,000 to $100,000-plus automobiles.
While Russia’s auto sales slid 1.1% for November, Bloomberg points out that this is a tourniquet that has brought sales out of their downward spiral, and slowing it to a 12% decline through November. “Cars, no matter budget or premium, are being sold like hotcakes currently,” Tatyana Lukovetskaya, who is the chief executive officer of the Rolf Group, one of Russia’s largest auto dealers, told Bloomberg. “We can’t recall such a boom in the market over the past decade.”
Russia is in an interesting place on the international stage at the moment. After President Vladimir Putin’s incursion into the Ukraine and subsequent annexation of the Crimea, which sounded off alarm bells around the world, a series of sanctions were put in place meant to immobilize the abilities of Russia’s wealthy elites, and others — including food bans that Putin himself put on imported victuals as a response. As a result, inflation in the country is hovering at around 8% on an annualized basis, and the effects of that are reflecting poorly in the department of foreign exchange.
In fact, the currency swings have gotten bad enough that a banker was able to purchase an Audi A7 last month and paid the equivalent of $40,000 less for the car than he would have paid previously. The A7, here in the States, goes for $65,900 at minimum, and in Russia, it’s going for 2,580,000 rubles — about $47,000 at current rates.
“In times of crisis, people view cars as an investment,” Andrei Rodionov, the head of corporate communications at Mercedes-Benz’s Russian unit, told Bloomberg. “The rule of thumb that a car loses 20% of its value once it leaves the showroom isn’t valid anymore.”
For automakers, the news isn’t all good. Sooner or later — likely next year — vehicles will be facing a substantial price increase, or else the OEMs must contend with selling their vehicles at a loss once the effects of currency fluctuations are built in. So while December’s sales report looks poised to echo that of November’s, Russians may need to start looking elsewhere to put their rubles into physical goods.