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Latvia Autos Report 2011
Business Monitor International, Nov 2010, Pages: 47
The Latvia Autos Report provides industry professionals and strategists, corporate analysts, auto associations, government departments and regulatory bodies with independent forecasts and competitive intelligence on Latvia's automotive industry.
Latvian auto sales have started to bounce back, with the region posting the second fastest auto sales growth in the EU for 2010. According to statistics from the European Automobile Manufacturers Association (ACEA), there were 431 new car registrations in Latvia in September 2010, up 79.6% from September 2009's 240 new registrations. Latvia's recovery has exceeded many expectations; however, total sales are still down significantly on their 2007 peak. This dramatic rebound was only exceeded by the Republic of Ireland, in which registrations grew by 93.9%. Overall, Europe saw declining car sales, with 1,261,643 new car registrations in the first three quarters of 2010 – down 9.2% year on year (y-o-y). Disaggregated Q310 statistics show most sectors have seen consistent growth. 153 commercial vehicles were registered in the first eight months of the year, with January's total of 6 increasing to 27 in August. This compares with a total of 273 sold in 2009. Light commercial vehicle sales have totalled 301 units at the time of writing, with 20 in January growing to 65 in August. Most importantly, the passenger car market has experienced dramatic growth as well, with sales to October 2010 totalling 3,803 and August sales at 555, compared with January's 298. Overall 4,295 motor vehicles have been sold in the first eight months of 2010, compared with 6,244 for all of 2009.
As the economic crisis hit Latvia in 2008 and 2009, car financing services collapsed. At the peak of sales in 2007, 80% of all new cars were purchased under leasing agreements. Today the figure stands at just 20%, with leased cars in 2010 forming only 2-3% compared with total sales in 2007. The situation for leasing is improving, however, as firms return to car financing. While financing is unlikely to recover to pre-crisis levels in the near future, the increasing ease of securing credit is helping individual consumers return to the market. As of August 2010, just 29% of vehicles were sold to individuals; however, this figure is up from 25% of sales in July 2010.
Car financiers were dissuaded from continued involvement in the Latvian leasing market due to massive default rates by consumers. As job losses and wage cuts became increasingly painful in Latvia, the number of car repossessions rocketed, leading to significant market difficulties.
As if to emphasise the long-term issues faced by the Latvian auto industry, the owner of Bensons Auto, Maris Bensons, has stated he believes the full recovery of the Latvian car market could be as far as 7 or even 10 years away. He emphasised that from past experience, such as the crisis following the Russian debt default in 1998, the demand for automobiles revives very slowly. Bensons also warned of the squeeze being felt by dealerships as a result of manufacturers' increasing determination to vertically integrate their distribution network. This trend is occurring around the world as auto makers seek higher profits in markets where growth seems limited.
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