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In terms of new cars, they now are. According to 2011 statistics, Russians bought 17.6 new automobiles per 1000 people. This indicator is still quite a bit below most of Western Europe, such as Germany’s 38.5, France’s 33.4, Britain’s 31.9, Italy’s 30.1, and Spain’s 20.0. However, it has already overtaken most of East-Central Europe, whose figures are: Czech Republic 17.0, Slovakia 12.5, Estonia 11.7, Poland 7.2, Hungary and Ukraine both 4.5, Romania 3.7. Likewise, some countries that by the 1990’s came to be regarded as natural parts of affluent Europe are now behind Russia on this measure: Portugal 14.4, Greece 9.0.
Now this is just one example, and the market for one consumer durable good isn’t going to be perfectly reflective of the overall situation. The crises in the PIGS may be temporarily dissuading nervous consumers from making large purchases; another factor to consider is that their overall car fleets are bigger and newer than Russia’s, so there is not as much of an incentive to get new cars. And taking into account a much larger basket of goods, the World Bank estimates Russia’s GDP per capita (at PPP) to be $20,000, which is still considerably behind $25,000 in Portugal and the Czech Republic, and $32,000 in Spain.
What’s all the better is that the current improvements in Russia’s relative position are happening against the background of extremely benign debt dynamics; aggregate debt is only 74% of Russian GDP, compared to 184% in China, 280% in the US, and more than 300% in most of Europe. This leaves it with a great deal of fiscal and monetary wiggle room in the event of a renewed global crisis that is no longer available to the developed world or lauded emerging markets such as Brazil, India, Poland, Turkey, and Poland. While the affluence gap between Russia and the most developed nations remains large it is nonetheless being steadily and sustainably closed.
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New car sales also depends on the import of second hand cars. It is much easier to import West European second hand cars in Eastern Europe than it is in Russia.
R Russians as rich or richer than Czechs? Yes, if u exclude the caucasus, no if not…! But is being rich the only criteria of affluence or power..?
http://www.bloomberg.com/news/2012-01-12/russia-best-selling-cars-january-to-december-table-.html
Best selling cars in Russia are cheap and unreliable Russian made Ladas, that do not meet European standards in safety, emissions, style, you name it. Prices of Ladas are also heavily subsidized, that is why Russians can afford to buy them.
In Europe very very few people would ever consider driving a Lada. That is why Ladas are no longer even imported to f.ex. Finland
http://www.barentsobserver.com/no-more-lada.5015240-116321.html
Best selling car in Czech Republic was Skoda Octavia.
http://bestsellingcarsblog.com/2012/01/08/czech-republic-2011-octavia-fabia-superb-on-podium-again/
Starting price in Czech Republic is 18.000 USD. Best selling car in Russia was Lada Kalina. Starting price in Russia is 9.000 USD. So to get the most popular car in Czech you have to twice as much as in Russia. I will therefore conclude that Czechs are twice as rich as Russians.
Ok, to be fair, maybe an average Russian is not buying just one new Kalina, but three (and spend 27.000 USD), because you need at least three Kalinas to be sure that you can go where you want to:
http://www.youtube.com/watch?v=8S-yL5C8BYk
I used to live in the Czech Republic, and currently live in Russia.
This is one case where it’s really hard to compare countries just because of the size and complexity issues. Czech Republic is small, compact, homogeneous, evenly developed, without separatist movements or much civil conflict. It’s also part of the EU and subject to that straightjacket. Russia is huge, with vast regional differences, income inequality, separatism in some parts, and uneven development. In US terms, comparing Russia with the CzR is like comparing California with Iowa. Not enough in common for the comparison to be meaningful.
Dear Anatoly,
Contrary to what some of your commentators say I think the comparisons you make are meaningful and moreover I agree fully with the thrust of your article. On the subject of the relative value of cars I would simply say that price and value are not the same thing and the fact that a Lada Karina is cheaper than a Skoda Octavia and may be a less refined car is for the purpose of the point you are making entirely beside the point.
I expressed a view in a recent comment to one of your posts that before long Russia might be both richer and more democratic than some more established western democracies. I stand by that comment.
Just a little correction : 17.5 automobiles per 1,000 people. And not 17.5 per person.
Thanks! Eagle eye!
If the Russian leadership had vision, they would aspire that all functional citizens become certified small aircraft pilots, and move the car factories upscale in strategic value as soon as possible. Europe and the US have woken up to the fact that future economic growth depends on intermodal transport planning, not auto sales or production in isolation.
The Lada 4�4 looks like a pretty useful vehicle. It’s important for such a vehicle to be mechanically simple as possible to facilitate in the field repair or mantainance.
You simply don’t need that many pilots, even if you exclude the people who live in the big cities
Another thing we need to consider is the state of public transport in eastern European countries compared to Russia, especially long-distance public transport between cities and major towns. Outside Moscow and St Petersburg and their metropolitan networks, how much of an alternative to long-distance car travel does public transport compare?
What about the effect of climate on roads and how would that affect the durability of cars? The Russian climate would be much more variable than in most eastern European countries and this would have some impact on road conditions and on how quickly cars wear out in Russia. If only Saab hadn’t gone bankrupt but instead had set up a factory in Russia years ago!
Apart from cars, what other consumer products could be used as a measure to compare Russian and eastern European prosperity levels? What about the level of Internet usage in cities, towns and villages? How many fridges and dishwashers are Russians buying? What percentage of the average family income in European Russia is being spent on food, rent or mortgage payments, or on consumer electronics toys?
I agree! An efficient domestic flight service linking major cities and towns would be preferable to lots of small aircraft flying around during the winter-time, especially in those areas where the sun shines for only a few hours a day!
Dishwashers depend on the size of the kitchen and household and the cost of domestic help. Rent/mortgage is under normal circumstance everywhere in the same order (between 30 and 40% of income). Consumer electronics on the freedom men have to spend money. In reality it is very hard to compare two countries where the average income is comparable and see who is wealthier
South Australia, Victoria: 25%
Queensland, Tasmania: 24%
Western Australia: 23%
Australian Capital Territory: 19%It would be interesting to see how average households in Russia and other countries compare with Australian households. Even if the average household is indeed paying 30% or more of its annual income on rent / mortgage payments, that could mean that in some countries, most families are under financial stress. Another way of checking this would be to see how long the average household would survive on its savings if it had no income (anything less than 30 days would mean the average household is under financial stress).Replies: @Jen, @kirill
In Australia, paying 30 – 40% of your income on rent or mortgage repayments is regarded as a sign of mortgage stress. In 2011, the breakdown of what the average household in each Australian state was paying this percentage of its annual income on rent or repaying its mortgage:
New South Wales: 27%
South Australia, Victoria: 25%
Queensland, Tasmania: 24%
Western Australia: 23%
Australian Capital Territory: 19%
It would be interesting to see how average households in Russia and other countries compare with Australian households. Even if the average household is indeed paying 30% or more of its annual income on rent / mortgage payments, that could mean that in some countries, most families are under financial stress. Another way of checking this would be to see how long the average household would survive on its savings if it had no income (anything less than 30 days would mean the average household is under financial stress).
South Australia, Victoria: 25%
Queensland, Tasmania: 24%
Western Australia: 23%
Australian Capital Territory: 19%It would be interesting to see how average households in Russia and other countries compare with Australian households. Even if the average household is indeed paying 30% or more of its annual income on rent / mortgage payments, that could mean that in some countries, most families are under financial stress. Another way of checking this would be to see how long the average household would survive on its savings if it had no income (anything less than 30 days would mean the average household is under financial stress).Replies: @Jen, @kirill
Sorry, the first paragragh doesn’t read properly. It should be interpreted to mean that in 2011 the average household in New South Wales was paying 27% of its annual income on rent / mortgage payments, its equivalent in Victoria and South Australia was paying 25% of same on rent / mortgage payments and so on.
I would rather compare average prices of bought cars, not prices of the best selling ones. E. g. suppose there is a dozen of almost equally selling cars of which one cheap brand leads by a tiny margin, whereas others are twice more expensive than Octavia. Fraction of bought Russian cars (note, there is a couple or so of brands only) is shrinking, meaning that the foreign ones (a couple of dozens of brands) are bought more often. As far as I remember, Russia is the world’s second, after China, buyer of RR’s, Bently’s and Maybach’s. These certainly affect the averages. Although, after all, I think that average prices of purchased cars will not differ significantly from the ratio of the GDP’s per person.
South Australia, Victoria: 25%
Queensland, Tasmania: 24%
Western Australia: 23%
Australian Capital Territory: 19%It would be interesting to see how average households in Russia and other countries compare with Australian households. Even if the average household is indeed paying 30% or more of its annual income on rent / mortgage payments, that could mean that in some countries, most families are under financial stress. Another way of checking this would be to see how long the average household would survive on its savings if it had no income (anything less than 30 days would mean the average household is under financial stress).Replies: @Jen, @kirill
Very good point. The rents are quite high here in Toronto. House prices are absurdly high. I think this is a real bubble and don’t buy the arguments that Canada is nothing like the USA in terms of real estate and the banking system. Anyway, Russians were greatly helped in the 1990s that they kept their Soviet apartments and weren’t kicked out into the street by parasite landlords or mortgage defaults. If the same economic decline had occurred in western countries there would have been very high homelessness. It is still true today that Russians don’t pay 40% of their incomes for housing and mortgages are not widespread. But this is changing.
I find it funny how the much maligned commie blocks became prime real estate. I guess those drab Soviet facades weren’t so drab after all. One of my friends, who is a heavy smoker, owns an apartment in a 1980s commie block in St. Petersburg. When I visit his unit it is hard to believe that a smoker lives there. The ventilation is better than anything I have seen in “superior” western apartment blocks.
Judging by what I see trravelling on the Moscow metro every day, the most evident consumer goods that Muscovites are buying are e-book readers, ipads, iphones, and mobile telephones, on which they play games incessantly or listen to music. The Moscow metro, famous amongst other things for its bibliophile passengers with their noses buried in books, is now becoming frequented ever more increasingly by passengers with their noses buried in e-book readers.
My wife and I lived in a two-room flat in a five-story Kryshchevka house until we started making our contribution to Russia’s “demographic crisis”. Then, in 2002, we moved into a far more modern and spacious three-room flat in the next street; we didn’t sell our old flat though. My wife bought the flat in the Kryshchevka, where she was brought up, after the USSR had folded up. It was a good investment. We are constantly contacted by agencies offering us tenants as the flat is centrally located (Taganka) and affordable. Furthermore, when the Kryshchevka where we used to live gets its long awaited demolition order (Luzhkov promised several years ago that there would soon no longer be any of them standing in Moscow: he was mistaken or lying), we will be offered other accomodation which, by law, cannot, if I’m not mistaken, be located more than 2 kilometres from the demolished residence, or given financial compensation. I know several other families in this neighbourhood who are also waiting for their old Kryshchevka flat to bite the dust and looking forward to receiving cash compensation or a new flat.
Our contribution towards helping solve Russia’s “demographic crisis” that is!