Every month you’ll hear about the number of new cars that are sold. This is usually taken as a bellweather for the health of the economy. Cars are expensive and the more that are shifted in any one month, or indeed year, the healthier the economy. Also because so many people use their car to get to work, an upswing in the demand for cars indicates an upswing in activity across all sorts of areas.
Last year, while the second-hand car market moved ahead, Irish new-car sales dropped 6.6pc in 2013. This was despite a sales surge after the introduction of the new bi-annual ‘132’ registration on July 1. Sales fell to 74,303 from 79,574 in 2012.
Contrast falling new-car sales in Ireland with the situation in the UK, where the end of the recession, the availability of credit and an unemployment rate almost half of ours, has seen new-car sales go through the roof.
Last year, there were 2.3 million new cars sold in Britain. That’s a lot of motors and it compares to 2.9 million cars bought in Germany. It also marks a 10.8pc increase in UK car sales on the year.
Car purchases in Britain are now higher than at any time since the 2007/08 crash. So yes, the British bought 2.3 million cars last year but did you know that the Russians bought 2.7 million cars in 2013, not far behind Germany? There seems to be an impression among those who have not spent much time in Russia that it is still a Cold War country, with few retailing opportunities. This is very far from the truth. For example, Russia is already the largest telecoms market in Europe. Russia’s retail base is powerful. In fact, Russia will soon be a bigger retail market than Germany.
In contrast to the maxed-out consumers of much of Europe and the US who are up to their gills in debts, Russian consumers are sitting on vast housing equity. There is almost no personal debt in Russia. And with just 260 cars for every thousand Russians – compared to around 540 cars per thousand in Germany – this massive eastern market of 145 million people is far from saturated. The demand for cars will grow and grow in Russia and that’s why leading carmakers such as Ford, VW, Renault and Peugeot-Citroen have invested heavily in Russia. At the moment, Russia is being portrayed as the Cold War evil empire of John McCain’s imagination. For those with similar mindsets, the consumer image of Russia is still of a man smoking a raspy fag, driving a Lada. In reality, it is something very different.
Years ago when I studied Russian in Ruza, 80 miles to the west of Moscow, Russia was just beginning to emerge from Communism. This difficult period was followed by the crazy Yeltsin years, culminating with the 1998 default. Thereafter, the country began to show signs of becoming a more “normal” economy. Granted, it is still too dependent on resources and admittedly the oligarchs have robbed the country of its money and ploughed Russian mineral wealth into fancy property all over the world, but we are still talking about Europe’s soon-to-be second-largest retail market. Russia is already Europe’s biggest market for food, telecoms and white goods and it will soon surpass Germany to become Europe’s largest retail market overall.
The West’s tactic today, as outlined by William Hague and John Kerry, is to target individuals as well as the general Russian public with sanctions in order to force Russia to leave Crimea. We know that Russia, under both Yeltsin and Putin, has witnessed the single biggest transfer of a country’s wealth from the state to about 400 families at the very top. The West’s hope now is that by choking off the Breitlings, Bentleys and Bugattis, the oligarch’s wives and leggy mistresses, shocked at having to “rent” their skis rather than bring their own top of the range models to St Moritz – will lean on their men to lean on Vlad the Expropriator, to give Crimea back to Ukraine! It will take more to dislodge Putin from Crimea than an absence of Remy Martin, and therefore sanctions against Russia won’t affect political power in the Kremlin that much. Russians have put up with a lot more than not having access to iPhones and the like for a while and anyway, there is always China for sanction-busting. Don’t tell me that the country that counterfeits everything, will not open its massive land border with Russia for sanction-busting business. And who loves a bit of sanction-busting? Why the mafia and illegtimate business of all sorts.
So who will get hurt? Sanctions will hurt European exporters big time which is why the German stock market has fallen 6pc since the Ukrainian crisis began.
Irish firms export goods and services worth about €637m to Russia every year, making it one of our more important trade partners outside the EU and US. Irish exports of goods to Russia grew 183pc between 2004 and 2012, with growth potential for bilateral trade in services and goods estimated at around €3bn a year out to 2020.
Russia, with its population of 143 million, is the second-biggest trading partner for Ireland among the so-called BRIC (Brazil, Russia, India and China) economies.
Therefore, Irish companies, particularly food and drink companies which have made inroads in Russia, will be badly affected by sanctions. Interestingly, the history of sanctions is not a particularly bright one. When a regime is entrenched, where the violating country is self-sufficient in energy and where the opportunity for sanction-busting is so enormous, what tends to happen is that bad business drives out good business. The South African apartheid regime survived for 30 years under sanctions. Russia is not Serbia or even South Africa, but it is Europe’s biggest neighbour and biggest supplier of energy. As a result, the reality when seen from Berlin is very different from the reality sitting in Washington. Does Europe have the economic stomach or the financial muscle to endure this war of attrition with Russia over Crimea – a place many Europeans believe is Russian anyway? I have my doubts.
David McWilliams writes daily on international economics and finance at www.globalmacro360.com
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Interesting article and very relevant. The interesting thing about this “political situation” in the Ukraine is that we had a twice democratically elected government overthrown by a bunch of neo nazis funded through Nuland by the US. How does this represent democracy or the “will of the people”. A lot more people are starting to think critically about these never ending displays of US imperialism and are starting to see through the rubbish the likes of Gilmore is spouting. It is probably because Russia prevented a war in Syria which nobody wanted except the neocons and their friends in Israel.… Read more »
Ron Paul called it, the situation is ‘farcical’. The bust US and bust EU are going to sanction a booming Russia while lending billions to a bust Ukraine, money Ukraine will use to buy gas/oil from Russia, all because Yanukovych had his one moment of clarity and realised that navigating towards the EU would be economic suicide for an antiquated agrarian economy like Ukraine’s. Russia has long kept Ukraine’s ’19th century’ economy afloat with discounted gas and oil. Now without Russia’s support Ukraine will disintegrate into a failed bankrupt state without friends, which is ironic, considering that the Maidan protest… Read more »
Adelaide you saved me a job you just said everything I Wanted to say,?
Adelaide you saved me a job you just said everything I Wanted to say,? O one other thing that Horrible man Putin Done he gave all old age pensioners In Crimea a Rise to bring In Line with Russia,
Will the EU compensate Irish exporters for losses incurred as a result of a boycott that undermines their business effectiveness ?
Out biggest problem, is that we are not disciplined enough, or sovereign enough to defend our interests. Expect Ireland to get walked over again.
“The 1998 Default”
I always figured that the commies were in reality the best capitalists. Russia defaults takes the pain and is now surging ahead. The west responds with central planning and nationalizes debt and mires itself in stagnation. President Pukin knows what he is doing alright.
And of course, the UK or European politicians wouldn’t lie to us about the number of cars sold. Of course the numbers are real. See “Where ‘Channel-Stuffed’ German Cars Go To Die” on zerohedge at http://www.zerohedge.com/news/2013-03-17/where-channel-stuffed-german-cars-go-die .
Eurasian integration We understand that these actions were aimed against Ukraine and Russia and against Eurasian integration…..But there is a limit to everything. And with Ukraine, our western partners have crossed the line …. They must have really lacked political instinct and common sense not to foresee all the consequences of their actions. Russia found itself in a position it could not retreat from. If you compress the spring all the way to its limit, it will snap back hard. You must always remember this….. “The address of Russian President Vladimir Putin to the State Duma deputies, Federation Council members,… Read more »
David McWilliams uses vehicle sales as an implied indicator as to the health of the UK economy – it’s interesting but there seem to be too many caveats, channel stuffing mentioned above, and ‘catch up sales’ from previous years. It’s only vaguely interesting, after all, wasn’t 2006 the best year ever for vehicle sales in Ireland? My suggestion for a meaningful indicator is the recent announcement regarding the annuities market and pensions. AndrewGMooney mentioned it a few months ago, and it’s recently blown up in public. By scrapping the link between annuities and pensions, the government has effectively said that… Read more »
What a great game Vlad has played….
tremendous !!
Now Comrades…23 comments since Thursday. .? What will become of us ?
Latvia Comrades !! …liberate the oppressed Russians of Latvia !!!
The morale compass that perhaps…belonged to the west lies shattered & broken on the steps of the White House..
Now. ..who’s move is it..?
Good Morning
O’bama is a weak and feeble leader. Putin showed his strength and gave him the two fingers. I would prefer a leader that has his country’s best interest at heart than one like Obama who does not. Obama has ruined NASA, driven up black on white hate, destroyed the economy, disrespected and debased the White House, its now the Outhouse, deconstructed the military and even though its still the most powerful, it needs to be rebuilt but he has such hatred for guns and power of this type it may well be that another 2 years will totally destroy it,and… Read more »
I am sorry for you Smokie….I truly am But while Bush & Co were surrounding themselves with yes men who relished & gloated over “A New American Century”…Mr Putin was waiting for the grass to grow long in which he would bide his time. In this age that Esinhower predicated…one of the “Military industrial Complex”….. It matters not who is the “leader of the free World”.. I find it sad..as a Irish person to see America crumble under the weight of her lies & foreign policy. Does one need to sleep now to see “the American Dream” ? How can… Read more »
No need to be sorry for me RR6, its great to be me and I don’t condemn Russia, they have a real leader, albeit one with a chequered past, at least he is looking out for the good of his country. Imagine Enda and the boys faced with this. It would be “brown pants” time for all of them. Hell they cant even sort out the whistle blower fiasco. I would have had that in the past a few hours after it surfaced, but I am strong and they are weak, extremely weak. As for the American dream? It may… Read more »
Economists and the media talk about countries in terms of economic production, imports, and exports. National pride, where it is even admitted to, it’s raised during some political activity, generally designed to weaken the nation state. Given history, it’s understandable that some political movements would choose to use whatever means they can (immigration/emigration, media bias, etc) to weaken the nation state. It’s the sort of thing that politicians and media people believe works: social engineering. Much in the same way that they fundamentally believe in central economic planning, to some degree or other. This manifests itself in a load of… Read more »
Russia v USA is a phoney war. The USA urgently needs and wants to devalue the US $ by 30 to 50%, however, for obvious reasons the USA lack the political courage to implement this devaluation themselves. The global economic war which is taking place has accelerated as a result of Putin’s actions, this will deliver the desired devaluation for the USA— much faster than would otherwise happen. Putin can do whatever he wants and he knows it. Both sides will achieve their desired end game. Putin will take the blame for the collapse of the US $ as the… Read more »