Watch Out European Auto Market Here Comes Russia

Germany and several other nations in Europe have long enjoyed being the largest auto markets in the region. These countries should not rest on their laurels because Russia is breathing down their neck.

Russia is poised to become the number one regional auto market by 2014, according to Russian Trade Minister Viktor Khristenko.

In 2010, Russia represented the fifth largest car market in Europe. Germany, Italy, France, and the UK were all ahead of it then, but since that time, Russia has advanced to the number three spot.

Mr. Khristenko attributes steady growth in Russian production and an expanding domestic market. He said he was “absolutely sure” that Russia will hold the top position by the year 2014.

Russia started its own cash-for-clunkers vehicle program in early 2011. During the first two months of the year, sales of passenger cars skyrocketed 77 percent, according to the Association of European Businesses.

The following three months of 2011 were characterized by additional activity, leading the Russian car market to the number three position in the region.

Earlier this year, the Russian government entered into deals valued at $6.3 billion with foreign car makers. Fiat alone invested $1.1 billion for a local car factory expansion and for an engine production facility.

It is anticipated that General Motors will invest $1 billion for the expansion and modernization of its Russian facilities and Volkswagen is expected to invest $900 million in the Russian car industry.

If the auto market in Russia continues to grow as predicted, the car finance industry should also experience positive results. Increased vehicle sales should mean more car loans because most consumers do not pay cash for their autos.

The UK should do what it can to retain its hold on the industry or it could face losing a slice of this financial pie.