Ford sees big Russia gamble vindicated as sales finally turn corner

Sun Feb 19, 2017 9:55am EST
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By Jack Stubbs and Gleb Stolyarov

MOSCOW (Reuters) - Ford (F.N: Quote) has become the first major foreign carmaker in Russia to see sales grow after three bad years, potentially vindicating its decision to double down on a notoriously volatile market when rivals decided to cut and run.

Sales of cars in Russia have fallen by more than half since a 2012 peak of 2.9 million vehicles, due to an economic crisis brought on by low oil prices and Western sanctions. The market fell by 11 percent last year, and was down a further 5 percent in January from a year earlier.

Ford's big U.S. rival General Motors (GM.N: Quote) pulled out of Russia two years ago. But Ford chose not only to stay, but to keep investing, launching new models with modifications designed to suit the country's harsh driving conditions.

Since 2011, its joint venture with Sollers SVAZ.MM, a Russian partner, has ploughed $1.5 billion into making cars locally to local specifications.

Now Ford's sales have turned a corner and rose 10 percent last year, an achievement the company says is proof its strategy is at last paying off.

The 40,000 Fords sold in Russia last year are still barely more than a fifth of the almost 190,000 vehicles the company sold in 2008, before the global financial crisis brought the first of two collapses in the Russian car industry in less than a decade.

During the latest crisis, Ford's share of the market for foreign cars fell at the expense of Korean competitors Kia (000270.KS: Quote) and Hyundai (005380.KS: Quote), which chose to shore up market share through aggressive pricing. But now their sales are still falling, while Ford's are on the rise.

The Russian market is "starting to turn", Ford CEO Mark Fields told Reuters last week, promising to stand by the company's investments in Russia. "Our intent is to build on that."   Continued...

FILE PHOTO:  Visitors walk past Ford cars at a dealership of Genser company in Moscow, Russia, February 14, 2017.   REUTERS/Maxim Shemetov/File Photo