Rolf Group’s long anticipated merger with Finnish logistics company Avelon Group has been stopped and the Russian car dealer has announced it will also stop selling Peugeot vehicles in Russia due to the slump in demand.
Rolf is the largest foreign car dealer in Russia. Earlier in March it extended its distribution agreement with Mitsubishi to import cars into Russia by another five years.
The merger with Avelon, which was announced last August and would have given Rolf a majority control, was expected to be completed before 2009. It was also expected to generate $500m in revenue this year, but the dramatic downturn in the market has led to revised forecasts and now to an official suspension of the proposed deal.
Avelon's Managing Director, Patrik Puskala, told Automotive Logistics that "the financial crisis and the drop in Russian market were the unexpected reasons that changed the foundations of the intended merger" but that it would not affect Avelon's solid postition in its domestic market or its continued co-operation with Rolf. "We continue our well-running co-operation with Rolf and will together keep an eye on the develepment of the situation [in Russia]," he said.
Avelon expects to move significantly fewer cars through Finland this year. "We expect to handle around 70,000-80,000 units to Russia via Finland this year, which is a decrease of 40% compared to last year" said Puskala. The company moved 120,000 units via Finland to Russia in 2008.
Meanwhile, Rolf is also halting the expansion of its dealer network because of the downturn.
PSA Peugeot-Citroën was counting on sales in Russia to compensate for slow growth in Europe and had planned investment in a Russian plant at Kaluga with Mitsubishi in which the French company was taking a 70% share. The combined investment is €470m ($622m). But the market continues to deteriorate, highlighted this week by Russia’s Industry and Trade Minister, Viktor Khristenko, revising down his projection for demand this year from a 40% drop to 60%.
