Annual PwC Survey 2016 edition

The cost of car ownership in Russia

2The cost of car ownership in Russia

Доля стоимости топлива в общей стоимости автомобиля тем выше, чем дешевле автомобиль, 20 % тратят на бензин автомобили В класса, и 6 % - Е-класса

6 %20 %

Снижение ставок по кредитам по всем классам по сравнению с январем 2015 г. вызвано снижением ключевой ставки с 17 % в 2015 г. до 11 % по состоянию на январь 2016 г.

2015

17 %

2016

11 %

Стоимость страхования КАСКО по состоянию на январь 2016 г. снизилась в денежном выражении в среднем на 23 % по всем анализируемым классам кроме полноразмерных внедорожников свыше 3 млн руб.

КАСКО

23 %

Other expenses:

Planned maintenance:

Insurance:

The cost of car ownership

Loss in value:

Fuel expenses:

Taxes and duties:

the product of the average kilometres travelled by fuel

consumption and price of a litre of fuel (survey data use figures

for gasoline engines)

vehicle registration with the State Road Traffic Safety

Inspectorate, transport tax, luxury tax (for cars priced at

over RUB 3 million)

data provided by dealers and based on a three-year

warranty period

the cost of winter tyres and car wash (twice per month)

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)

the difference between the price of a new car and a used car (three years)

Loans:Interest on

a three-year loan (50% down payment)

3The cost of car ownership in Russia

6%20%

2015

17%

2016

11%

CASCO

23%

21% - 27%

2016

2015

47%31%

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.

As of January 2016, the loss in value rose across all car classes.

As of January 2016, insurance premiums account for a significant share of the total cost of car ownership.

As of January 2016, premiums for CASCO insurance decreased in monetary terms by 23% on average against January 2015 in all surveyed car classes, except for full-size SUVs priced at over RUB 3 million.

The lower interest rate in all surveyed classes (compared to January 2015) was driven by the cut in the key interest rate from 17% in 2015 down to 11% in January 2016.

The cheaper a car is, the higher the percentage fuel represents in its total value: 20% for Class B autos and 6% for Class E vehicles.

Key metrics

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 2016 and compared the results with the January 2015 data.

As of January 2016, 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

20% on average;

• decrease in kilometres travelled by 24% 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.

The cost of ownership means both operating expenses and losses in a car’s value (acquisition cost less resale revenue).

5The cost of car ownership in Russia

Table 1:Key survey findings

(*) 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

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 61.7 90.8 124.8 323.4 113.9 168.1 248.2 473.8

Operating expenses 137.1 174.8 247.5 367.6 213.9 262.6 381.8 564.7

Loans (interest only) 23.2 43.5 68.7 115.1 63.1 81.8 106.3 156.0

Fuel 39.0 44.5 45.1 42.0 42.5 51.2 76.2 78.2

Insurance (CASCO and CMTPL) 49.2 58.9 99.5 154.9 73.8 88.4 149.5 240.5

Maintenance (planned) 9.3 10.2 12.3 19.7 12.9 14.4 15.8 19.3

Taxes and duties** 3.0 4.1 6.6 17.6 5.7 9.3 13.5 48.6

Other maintenance costs*** 13.5 13.7 15.3 18.4 16.0 17.4 20.4 22.1

Total average cost of ownership per year 198.8 265.6 372.3 691.0 327.8 430.7 630.0 1,038.5

Average cost of ownership, RUB/km****

11.9 15.7 19.8 40.5 20.3 23.4 33.4 56.2

Parking***** 120.0 120.0 120.0 120.0 120.0 120.0 120.0 120.0

Total average cost of ownership per year, including parking

318.8 385.6 492.3 811.0 447.8 550.7 750.0 1,158.5

6The cost of car ownership in Russia

Loss in valueLoss 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 2015, 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 12%.

The increase in this indicator versus 2015 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.

LoansCar loan interest rates dropped from 21.5% in January 2015 to 16.1% on average across all

classes in January 2016 (see Table 3: Key analysis assumptions) due to the reduction in the key interest rate from 17% to 11% as of January 2016.

As a result, in January 2016 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 19-23%.

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 12-21% of the total cost of car ownership.

FuelFuel 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 20% 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 12-13% of the cost of ownership.

Insurance (CASCO and CMTPL)IInsurance is a significant item in

the total cost of car ownership, amounting to 17-27%. Compared to the same period in the previous year, the cost of insurance came to 20-30%.

As of January 2016, premiums for CASCO insurance decreased in monetary terms by 23% on average versus January 2015 in all surveyed classes, except for full-size SUVs

Survey findings on key components of the cost of ownership

7The cost of car ownership in Russia

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

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 2015.

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 dutiesTaxes 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 1.7-1.8%, with an average engine capacity of 149 and 142 h.p., respectively.

For Class E (Business), Mid-size crossovers and Full-size SUVs up to RUB 3 million, it is around 2.1-2.5%.

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 expensesOther car maintenance costs include winter tyres and car wash twice per month. These costs are

Figure 2:Breakdown of expenses by class, %

Class B Class C Class D Class E Compact crossover

Full-size SUV up to RUB 3 million

Full-size SUV over RUB 3 million

Loss in value Loans (interest only) FuelInsurance (CASCO and CMTPL)

Maintenance (planned) Taxes and duties Other maintenance costs

46

52

23

24

25

33

24

25

17

Mid-size crossover

3134 34

47

3539 39

23

2522 27

22

2321 24

25 4 3 3 4 3 3

15

1216

18

17

1919 17

8

2017

126

13 12 12

8The cost of car ownership in Russia

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 2015, 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 2016 and are based on PwC analysis, data provided by car dealers, and information from public sources.

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%.

Key assumptions 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

Car price, RUB thousand

578.8 951.6 1,282.6 2,509.0 1,295.6 1,723.8 2,472.4 3,481.2

Engine, h.p. 98 114 149 194 142 173 205 300

Kilometres travelled, km/year

16,644 16,882 18,833 17,063 16,146 18,435 18,833 18,467

Fuel consumption (gasoline AI-95, AI-92 or similar), l/100 km

6.8 7.4 6.6 6.9 7.3 7.9 11.1 11.3

Loss in value over three years, % of the initial value

31% 32% 29% 32% 27% 28% 30% 40%

Loan interest rates 13.1% 15.8% 19.0% 16.7% 17.2% 16.7% 15.5% 14.8%

Table 3: Key analysis assumptions (for Moscow and other major Russian cities)

Volkswagen

ToyotaNissan

KIA

Hyundai

Skoda

Mercedes

BMW

Mitsubishi

FordRenault

Audi

Lada

Mazda

Lexus

Infiniti

Range Rover

Jaguar

popular cars5

8 car classes

consist of

+ Automatic transmission

50%Loan

down payment

3 years

9The cost of car ownership in Russia

Scope of analysis

Class B (Compact) Compact crossover

Mid-size crossover

Full-size SUVs up to RUB 3 million

Full-size SUVs over RUB 3 million

Class C (Golf)

Class D (Mid-size)

Class E (Business)

Лада Granta

Figure 4:Mix of car classes

Volkswagen Golf

Opel Insignia

Mercedes E-class

BMW X5

Toyota Highlander

KIA Sorento

Renault Logan

KIA Ceed

Volkswagen Passat

BMW 5 Infiniti QX70

Toyota Land Cruiser Prado

Hyundai Santa Fe

KIA RIO

Skoda Octavia

Mazda 6

Audi A6 Mercedes GLE

Ford Explorer

Mitsubishi Outlander

Hyundai Solaris

Nissan Almera

Toyota Camry

Lexus ES Toyota Land Cruiser 200

Mitsubishi Pajero

Nissan X-Trail

Volkswagen Polo

Ford Focus

Skoda Superb

Jaguar XF Range Rover Sport

Volkswagen Touareg

Audi Q5

KIA Sportage Volkswagen Tiguan

Nissan Qashqai

Hyundai Tucson

Toyota RAV 4

Volkswagen

ToyotaNissan

KIA

Hyundai

Skoda

Mercedes

BMW

Mitsubishi

FordRenault

Audi

Lada

Mazda

Lexus

Infiniti

Range Rover

Jaguar

popular cars5

8 car classes

consist of

+ Automatic transmission

50%Loan

down payment

3 years

Volkswagen

ToyotaNissan

KIA

Hyundai

Skoda

Mercedes

BMW

Mitsubishi

FordRenault

Audi

Lada

Mazda

Lexus

Infiniti

Range Rover

Jaguar

popular cars5

8 car classes

consist of

+ Automatic transmission

50%Loan

down payment

3 years

10The cost of car ownership in Russia

Loss in valueThis indicator is calculated as the difference between the price of a new car and the price of a similar three-year-old 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 2016.

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-92, 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 maintenanceThis indicator is based on data provided by official dealers.

Taxes and dutiesThis 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 2016, 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.

Survey methodology

Oleg Malyshev Partner, Corporate Finance Practice Leader +7 (495) 967 6497 oleg.malyshev@ru.pwc.com

Press Service, PwC Russia Petr Yudin +7 (495) 967 6000 ext. 5018 petr.yudin@ru.pwc.com

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