BMI has become even more negative on the near-term outlook for the Russian autos sector over the past quarter. A worsening mix of falling consumer confidence, currency fluctuations, growing unemployment and falling fixed investment will force down vehicle sales and production in 2015 and keep sales volumes weak through to the end of our five-year forecast period in 2019. We are now targeting a 29.1% fall in sales and an 18.9% fall in production in 2015.
Looking forward, BMI believes that Russia's automotive industry will experience a sharper sales slowdown in 2015 than the 10.3% slump in vehicle sales seen in 2014. The government's announced efforts to buoy the market - such as the extension of the car scrappage scheme and subsidised auto loans scheme - will fail to address the key problems in the industry. The most pressing of these problems being: (a) rising vehicle prices, (b) worsening private consumption factors, (c) declining corporate investment. We therefore forecast vehicle sales to fall by 29.1% in 2015, with passenger cars (-29.1%) set to fare slightly worse than commercial vehicles (-28.6%).
With vehicle production heavily oriented towards domestic consumption we also hold a bearish view on vehicle production in the country over 2015. We forecast production of new vehicles to fall 18.9% to a five-year low of 1.529mn vehicles thanks to tumbling domestic demand and the weakness in the Russian rouble, which has raised input costs for automakers in the country. Highlighting this have been the large numbers of cuts to automakers' workforces and the more drastic decision by General Motors Company (GM) to cut cease production indefinitely. Given this bleak outlook, we forecast passenger car and commercial vehicle output in 2015 to fall by 20.1% and 9.1%, respectively. This represents an acceleration of declines seen in 2014 when production fell by 13.6%.
Despite slowdowns in production we stress that there will still be investment and revenue opportunities available to players in the automotive supply chain. More specifically, automakers pushing to reduce their dependence on imported components will create opportunities for the growth of domestic suppliers. Furthermore, with total demand for vehicles so subdued, local suppliers and OEMs will face less pressure in meeting supply needs and will prov ide them with time to make necessary improvements in the quality and quantity of the products they supply to major OEMs operating in the country.
In terms of the shifting competitive landscape, rising import costs have given companies with less reliance on imported components a strong cost advantage and we expect this to remain the case over 2015. Evidence for this trend is not hard to find. AvtoVAZ's Lada brand sales fell 28.9% year-on-year in 4M15 compared to the 37.7% fall in the overall light vehicle market and the company gained 2 percentage points in market share. The brand operates with the highest local content rate in the country with more than 80% of components for its most popular vehicles sourced locally. Hyundai and Kia have also shown far stronger performance than other foreign, mass-market automakers in the same period with company executives citing their localization of the supply chain as a key factor.
In contrast, Toyota and Volkswagen sales fell 37.2% and 47.0% y-o-y respectively. For these companies local supply contracts are less developed and both have a high-level of dependence on imported components. For US producers with local manufacturing activities the declines have been even more pronounced with GM and Ford Motor posting sales declines of more than 65%.