The cost of car ownership in Russia. Annual PwC Survey 2016 edition

Transcription

1 The cost of car ownership in Russia Annual PwC Survey 016 edition

2 Fuel expenses: the product of the average kilometres travelled by fuel consumption and price of a litre of fuel (survey data use figures for gasoline engines) Taxes and duties: vehicle registration with the State Road Traffic Safety Inspectorate, transport tax, luxury tax (for cars priced at over RUB 3 million) Insurance: the cost of Compulsory Motor Third-Party Liability (CMTPL, or OSAGO in Russian) and Comprehensive Cover (CASCO in Russian) insurance policies (for Moscow and other major cities) Loans: Interest on a three-year loan (50% down payment) The cost of car ownership Planned maintenance: data provided by dealers and based on a three-year warranty period Loss in value: the difference between the price of a new car and a used car (three years) Other expenses: the cost of winter tyres and car wash (twice per month)

3 Key metrics Loss in value is the second most significant item in the cost of ownership for all car classes, ranging from 31% of the total cost for Class B to 47% for Class E. 31% 47% CASCO 3% As of January 016, premiums for CASCO insurance decreased in monetary terms by 3% on average against January 015 in all surveyed car classes, except for full-size SUVs priced at over RUB 3 million As of January 016, the loss in value rose across all car classes. The lower interest rate in all surveyed classes (compared to January 015) was driven by the cut in the key interest rate from 17% in 015 down to 11% in January % 11% As of January 016, insurance premiums account for a significant share of the total cost of car ownership. 1% - 7% 0% 6% The cheaper a car is, the higher the percentage fuel represents in its total value: 0% for Class B autos and 6% for Class E vehicles.

4 The cost of ownership means both operating expenses and losses in a car s value (acquisition cost less resale revenue). Key findings on the cost of car ownership As part of the survey, we reviewed the cost of owning a car across various classes in major Russian cities as of January 016 and compared the results with the January 015 data. As of January 016, the cost of owning a car had fallen by varying degrees in different car classes. The key drivers behind this cost reduction include: cut in the key interest rate from 17% down to 11%; reduction in CASCO premiums by 0% on average; decrease in kilometres travelled by 4% on average. For more details on these data drivers, see the section titled Survey findings on key components of the cost of ownership. Importantly, the cost of owning a particular car can vary significantly, depending on its terms of purchase and the conditions for operating it. The key assumptions underlying this analysis are provided below.

5 Table 1: Key survey findings Indicator, RUB thousand/ year*, unless otherwise stated* Class B (Compact) Class C (Golf) Class D (Mid-size) Class E (Business) Compact crossover Mid-size crossover Full-size SUV up to RUB 3 million Full-size SUV over RUB 3 million Loss in value Operating expenses Loans (interest only) Fuel Insurance (CASCO and CMTPL) Maintenance (planned) Taxes and duties** Other maintenance costs*** Total average cost of ownership per year Average cost of ownership, RUB/ km**** , Parking***** Total average cost of ownership per year, including parking ,158.5 (*) average value over three years of ownership (**) transport tax and car registration (***) winter tyres and car wash twice per month (****) excluding parking (*****) for Moscow, the cost of eight-hour parking on all business days throughout the year Source: PwC analysis 5

6 Survey findings on key components of the cost of ownership Loss in value Loss in value is one of the most significant items of the cost of ownership for all classes of automobile. The survey shows that a three-year loss in value of Class B (Compact), Class C (Golf), Class D (Mid-size) cars and Compact crossovers ranges from 31% to 35% of the total cost of car ownership. For Mid-size crossovers and Full-size SUVs up to RUB 3 million, the loss in value accounts for 39% of the total car ownership cost. Class E (Business) cars and Full-size SUVs over RUB 3 million have posted the largest losses in value over the first three years in use at 47% and 46%, respectively. Compared to 015, loss in value grew in all car classes, especially in Class B (Compact), Class E (Business) and Compact crossovers. The growth in value loss rates ranges from 7% to 1%. The increase in this indicator versus 015 has been driven by more significant growth in prices for new cars as compared to used vehicles. This is due first of all to the growing weight of the currency component in rouble equivalent in the manufacturer s cost. Cars within a single class can lose value in different ways. This can be driven by numerous factors, e.g.: the reliability and reputation of a given car model; supply and demand for a given model in the used car market; availability of new, updated versions of a given car make and model in the market; price trends for similar new cars. Loans Car loan interest rates dropped from 1.5% in January 015 to 16.1% on average across all classes in January 016 (see Table 3: Key analysis assumptions) due to the reduction in the key interest rate from 17% to 11% as of January 016. As a result, in January 016 the interest rate on a three-year loan for all reviewed classes (with a down payment of 50%) averaged 16%, while a year ago this indicator amounted to 19-3%. Inside the various car classes interest rates vary, depending on the specific car model and special loan offers by banks. Low interest rates are typical of Class B (Compact) vehicles, which are covered mainly by the subsidised car loan programme. The prevalence of low interest rates for Class E (Business) cars and full-size SUVs over RUB 3 million is attributable to the fact that premium brands lend to their customers through their own banks, which offer optimal terms and low interest rates in order to sell vehicles rather than to generate interest income. Although average interest rates across all car classes are at the same level, the impact of rising interest rates is likely to vary in different classes. Thus, sales in the low- and medium-price segments are most sensitive to rising interest rates on car loans, while premium segment sales are relatively less dependent on increases in loan interest rates. Loan charges (interest) in all surveyed classes amount to 1-1% of the total cost of car ownership. Fuel Fuel expenses in the total cost of car ownership vary across the surveyed classes: as a car s price rises, fuel expenses shrink. For example in Class B (Compact) and Class C (Golf), the share of fuel expenses in the total cost of ownership amounts to 0% and 17% on average, respectively, while for Class E (Business) vehicles and Full-size SUVs over RUB 3 million this indicator is 6% and 8%, respectively. For the mid-price segment, fuel expenses make up about 1-13% of the cost of ownership. Insurance (CASCO and CMTPL) IInsurance is a significant item in the total cost of car ownership, amounting to 17-7%. Compared to the same period in the previous year, the cost of insurance came to 0-30%. As of January 016, premiums for CASCO insurance decreased in monetary terms by 3% on average versus January 015 in all surveyed classes, except for full-size SUVs 6

7 Figure : Breakdown of expenses by class, % priced at over RUB 3 million (compared to the same period of the previous year). CASCO tariff reduction is explained by wide spreading of franchise contracts, loss-free prolongation, limited CASCO coverage, CASCO customer attrition, resulting in a competition for clients in the insurance market. In monetary terms, the more expensive the car, the higher the insurance premiums. As a result, the heaviest insurance expenses are incurred by owners of Class E (Business) cars and Full-size SUVs. In addition to the car price, a number of other factors have an impact on the cost of insurance: cost of spare parts and repairs; car theft rate; car exclusivity, etc. Taxes and duties Taxes and duties account for about 1.5% of the total cost of ownership for Class B (Compact) and Class C (Golf) cars with an average engine capacity of 98 and 114 h.p., respectively. For Class D (Mid-size) and Compact crossovers, this indicator comes to around %, with an average engine capacity of 149 and 14 h.p., respectively. For Class E (Business), Mid-size crossovers and Full-size SUVs up to RUB 3 million, it is around.1-.5%. For Full-size SUVs over RUB 3 million, the share of taxes and duties in the total cost of ownership amounts to 4.7%, which is due to the luxury tax on cars priced at more than RUB 3 million. Other expenses Other car maintenance costs include winter tyres and car wash twice per month. These costs are Class B Class C Class D Class E Compact crossover almost at the same level in monetary terms, so their share in the total cost of ownership decreases with any increase in the car price. Parking expenses (for Moscow) Currently, such expenses are mostly relevant for Moscow as well as other major Russian cities that already have paid parking facilities (Moscow parking rates were used for 47 Mid-size crossover Full-size SUV up to RUB 3 million Full-size SUV over RUB 3 million Loss in value Insurance (CASCO and CMTPL) Loans (interest only) Fuel Maintenance (planned) Taxes and duties Other maintenance costs calculation purposes; rates are lower in other cities). Yet, given the ongoing need for paid parking, the share of these expenses in the cost of ownership is rather significant and increases with any decrease in the car price. Parking rates have remained unchanged since January

8 Key assumptions The survey covered new car makes and models that are officially sold in Russia. For analysis purposes, eight classes have been identified corresponding to car size and price. Each class includes five popular cars (compared to the analysis carried out in early 015, the mix of cars has changed as sales of some models have been discontinued). Analysis findings for each class show the average result for cars in that class. All major indicators (car price, loan terms and conditions, etc.) are as of the second half of January 016 and are based on PwC analysis, data provided by car dealers, and information from public sources. Table 3: Key analysis assumptions (for Moscow and other major Russian cities) Key assumptions Car price, RUB thousand Class B (Compact) Class C (Golf) Class D (Mid-size) Class E (Business) Compact crossover The following key assumptions underlie our survey: A car is purchased with a standard equipment package, a gasoline engine and an automatic transmission. A car is purchased and driven in a major Russian city. A car is used by one owner during the warranty period (three years). A car is purchased on credit with a down payment of 50%. Mid-size crossover Full-size SUV up to RUB 3 million Full-size SUV over RUB 3 million ,8.6, ,95.6 1,73.8,47.4 3,481. Engine, h.p Kilometres travelled, km/year 16,644 16,88 18,833 17,063 16,146 18,435 18,833 18,467 3 years Loan 50% down payment + Automatic transmission Fuel consumption (gasoline AI-95, AI-9 or similar), l/100 km Loss in value over three years, % of the initial value % 3% 9% 3% 7% 8% 30% 40% Loan interest rates 13.1% 15.8% 19.0% 16.7% 17.% 16.7% 15.5% 14.8% 8

9 Scope of analysis Figure 4: Mix of car classes Class B (Compact) Compact crossover 8 car classes Лада Granta Class C (Golf) Renault Logan KIA RIO Hyundai Solaris Volkswagen Polo KIA Sportage Mid-size crossover Volkswagen Tiguan Nissan Qashqai Hyundai Tucson Toyota RAV 4 consist of 5 popular cars Volkswagen Golf KIA Ceed Skoda Octavia Nissan Almera Ford Focus KIA Sorento Hyundai Santa Fe Mitsubishi Outlander Nissan X-Trail Audi Q5 Class D (Mid-size) Full-size SUVs up to RUB 3 million Opel Insignia Class E (Business) Mercedes E-class Volkswagen Passat Audi A6 Mazda 6 BMW 5 Toyota Camry Lexus ES Skoda Superb Jaguar XF Toyota Highlander Full-size SUVs over RUB 3 million BMW X5 Toyota Land Cruiser Prado Infiniti QX70 Ford Explorer Mercedes GLE Mitsubishi Pajero Toyota Land Cruiser 00 Volkswagen Touareg Range Rover Sport Audi Mitsubishi Mercedes Volkswagen Nissan KIA Toyota Lexus Renault Range Rover Ford Lada Mazda Jaguar Skoda BMW Hyundai Infiniti 9

10 Survey methodology Loss in value This indicator is calculated as the difference between the price of a new car and the price of a similar three-yearold used car, based on analysis of data provided by official dealers and specialised car trading websites. Loans (interest) This indicator is calculated on the basis of a three-year loan with a down payment of 50%. The interest rate is based on car loan offers as of the second half of January 016. The calculation of the cost of ownership includes interest on loans only. Fuel This indicator is calculated on the basis of the average number of kilometres travelled by a car, fuel consumption per 100 km and the price of one litre of fuel. The average number of kilometres travelled by a car is based on data provided by specialised car trading websites. Fuel consumption per 100 km was assumed to be the same as specified in the vehicle s certificate. Fuel price (gasoline AI-9, AI-95 and AI-98) is based on quotes from public sources. Insurance (CASCO and CMTPL) This indicator is calculated according to premiums for CMTPL and CASCO insurance policies for car owners with the following profile: male, married with children, 30 years old, driving experience of 10 years, with a good driving record. Planned maintenance This indicator is based on data provided by official dealers. Taxes and duties This indicator includes car registration fees with the State Road Traffic Safety Inspectorate and transport tax. Transport tax is based on the transport tax rate in Moscow as of the second half of January 016, as well on the engine capacity. Luxury tax, which has been applied to cars priced at over RUB 3 million, is calculated as the product of transport tax by an additional multiplier that depends on the car price and its useful life. Other expenses This indicator includes the cost of winter tyres and car wash (twice per month). Parking expenses (for Moscow) РThis indicator is calculated as the average cost of an annual parking pass in downtown Moscow. The expenses are presented for illustrative purposes. 10

11 Contacts Oleg Malyshev Partner, Corporate Finance Practice Leader +7 (495) Press Service, PwC Russia Petr Yudin +7 (495) ext Experts from the PwC Russia Automotive Practice have extensive industry expertise and an indepth understanding of sales trends and the market environment. They are well versed in best practices for resolving the complex issues facing automotive companies. Our comprehensive service offering covers such critical areas as taxation, accounting, customs clearance, and transfer pricing, as well as advice on business development, market analysis, strategy development and other matters. We would be happy to discuss our potential collaboration with you and provide assistance in addressing the following challenges: analysing market potential, key players and trends; carrying out feasibility studies for new products; drafting corporate development strategies, including identifying top-priority development areas and new high-potential markets; optimising organisational structure and cutting costs; carrying out financial, tax and legal due diligence on business partners and acquisition targets; assisting in fund-raising, including business plan development, collateral evaluation and support in negotiations with partners and banks; loan restructuring services; support for M&A deals: searching for buyers or acquisition targets, carrying out business valuations and drafting deal documentation.

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