2014 has proved a positive year for new vehicle sales within Latvia. Over the first nine months of the year, passenger car (PC) sales were up by 19% year-on-year (y-o-y), at 9,239 units, according to figures from the European Auto Manufacturers Association (ACEA).
On the commercial vehicle side, 8M14 figures from ACEA show a total of 1,658 light commercial vehicles (LCVs) sold in country, with a further 754 medium and heavy commercial vehicles sold, plus a further 137 buses, for a total of 2,549 units sold year-to-date.
Adding the 2,549 CV units to the 8,445 PCs sold over 8M14 makes for a total new vehicle market of 10,994 units. On current sales trends, this leaves the Latvian new vehicle sales market on target to hit BMI's forecast of 16,384 units for the full year.
Looking forward, BMI's Country Risk team believes that the ongoing sanctions being levied against Russia by Western powers (as a result of Russia's activities in neighbouring Ukraine) could well impact on the Latvian economy as we enter 2015. Latvia is suffer ing in particular from the disruptions to trade imposed by first the West and now, in retaliation, by Russia. Russia remains a major export market for Latvia, especially in industries such as fish processing and dairy production. Even without these sanctions, we believe that decelerating Russian growth will translate into weaker external demand for Latvian exports. This could impact on CV sales within Latvia in particular.
The outlook for private consumption, a key indicator of the potential demand for new passenger vehicles within Latvia, is somewhat better. Moreover, against a backdrop of subdued inflation, the European Central Bank (ECB) looks set to keep interest rates at very low levels (the current lending rate was cut to just 0.05% in September 2014 and the deposit rate was cut to -0.2%), which should in turn lead to lower car financing rates and act as a support to Latvian new vehicle demand over the near term. This is why we currently hold a higher sales growth forecast for passenger cars (9.8%) than commercial vehicles (4.8%) in 2015. Overall, new vehicle sales will rise by 8.5% in 2015.
Over the full forecast period to 2018, BMI is currently forecasting 40% growth in new vehicle sales, to reach around 22,811 units sold per annum. This would still represent a fall from the market's 2007 peak of over.
As of end-September 2014, German carmaker Volkswagen (VW) and Japanese carmaker Toyota remain the dominant players within the Latvian passenger car segment, with reported market shares of 17.1% and 12.4% respectively.
The most recent comprehensive data by brand (for 5M14) show that VW continues to hold a dominant position in new passenger vehicle sales, selling 996 units over the period, for a market share of 16.7%. In second place is Toyota, which sold 837 units for a market share of 14%, followed by VW's Skoda subsidiary on 476 units (8%).
With the presence of another VW subsidiary, Audi, in tenth position, as well as small numbers of Porsche and SEAT sales in country, it is clear that the wider Volkswagen group has a dominant market position within Latvia, which it seems unlikely to relinquish any time soon.
Overall, the Top 10 is still dominated by European (7) manufacturers, with Toyota and Nissan the two Japanese manufacturers and Kia the sole Korean manufacturer within the Top 10 (in seventh position).
In terms of the top-selling models within Latvia over early 2014, Peugeot's 3008 a is the top-seller, followed by Skoda's Yeti and Octavia models. VW's Golf and Passat models are also popular, alongside Nissan's Qashqai.
The make-up of the CV segment varies across the three Baltic states. Estonia's market is heavily skewed towards LCVs, which represented over 75% of total CV sales over the 8M14 period, compared with 65% for Latvia and just 45% for Lithuania. In terms of heavy commercial vehicle (HCV) sales as a proportion of total CV sales, Lithuania's market has a rate of almost 50%, while Estonia's is below 30%. These proportions reflect the composition of each state's economy, with Lithuania's still oriented towards heavy industry, while Estonia (and increasingly Latvia) is geared more towards light industry and services.
Among LCVs, Toyota's Hilux, Renault's Master and the VW Caddy were the top-sellers over 2013.
Within the HCV segment, Volvo Trucks had a market share of 45.4% in the 16 tonnes and over segment during 2013. Other key players include DAF (23% share) and Scania (16.2%).
This report also contains new and fully updated Company Profiles (including SWOT Analysis) for Inchcape Motors and Moller Auto Baltic, two of the leading dealerships within the Baltic region.