Digital Russia 2008

KEY POINTS

PEST Analysis

The trend towards increasing authoritarianism that has been a distinctive feature of Mr Putin’s rule is likely to persist during the forecast period.
Capacity constraints, the slow pace of institutional change and the impact of real ruble appreciation will lead to a decelerating pace of economic expansion. GDP growth will nevertheless continue to be boosted by high oil prices, and is expected to average around 5% per year in real terms in 2008-12.
Total Russian Population: 141,377,752

Legal Framework (Automotive)

Russian Automotive Market: unsaturated market with a low car density and rising income levels
The taxes applicable on imported cars are expected to decrease from 25% to 15%.

Internet & Broadband Penetration

28,000,000 Internet users in Russia (representing 19.5% of the population) in June 2007
The proportion of Internet users among men in Russia (25%) exceeded that among women (18%)
Internet users by age group: 25-34: 31% – 35-44: 23%
Internet penetration is highest among students (51%), top managers (45%) and qualified specialists (41%)
Moscow has the highest Internet penetration of any major Russian city, with 42% of households online
Almost 30% of dial-up users in Moscow, representing approximately 150,000-170,000 potential customers, would gladly use broadband, but, at the moment, for technical reasons, it is not available to them.

e-Commerce

Almost ¼ of Internet users in Russia prefer making purchases at Internet stores rather than in traditional stores, according to a survey of 2,296 active Internet users across the country in October 2006
In the current group of online shoppers, 39% are at the high income level, and 41% are in Moscow.

Other Media: TV & Mobile

The cable television market in Russia is expected to increase 40% to $650m in 2007, according to the opinion of Yury Pripachkin, President of Russia’s Cable TV Association and Chairman of Renova Media’s Board of Directors. According to the same source, the broadband internet access market is said to have reached $1.2-1.3bn in 2007, with a growth rate of 40%. The consolidated figure for the two markets is estimated to amount to $4bn by the end of 2010.
The number of mobile phone subscribers in Russia grew by 20% year on year and reached 152 million in 2006, according to AC&M Consulting. This means a nationwide penetration level of 104.6%.

Customer’s Profile

The average profile of Russian —- Owner is: Man, age 33, with a tertiary education, working in a executive/managerial role in a SMEs selling or finance organization. He is married and likely with kids, with a household income of $ 2,000.
To note: The Dealer was responsible for 20% of rejection, whilst only 2% of the respondents saying it were the reason for buying it. This is quite relevant; being “went to a dealer for info” the favourite move by 65% of respondents whilst looking for info on buying a new car.

Competition

Foreign brand car sales continue to see significant growth with 70 % increase in 2007H1 over the same period in 2006. Russia will be the largest car market in Europe in the next 5 years
Increasing income levels among Russians is leading to an increase in the demand for expensive cars. The market share of small cars is expected to go down by 2012 while that of luxury cars and large cars is expected to increase.
Foreign car sales jumped 61 percent to 1,645,630 cars in Russia in 2007 compared to a year earlier
The most popular foreign car brand on the Russian market in 2007 was Chevrolet, with sales of 190,553 cars, including GM-AVTOVAZ’s share. Ford was in the second place with 175,793 cars sold, and Hyundai came in third with sales of 147,843 cars.
When choosing foreign-made cars, consumers often take into account quality and technologies rather than an apparent low price

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