The Russian car rental market is the youngest and probably the smallest among European countries. Its total size in 2014 was estimated at only US$70 million per year, according to statistics from the Russian Business Consulting Agency, yet it has grown from US$40 million in 2010.

Why is the market so small? Ordinary Russian citizens don’t rent cars: During the Soviet Union era, car rental didn’t exist, thus a culture of car rental never developed. For average citizens, car rental is still too expensive. This culture is slowly changing, though rental agencies — even in the large cities in the European part of Russia — are hard to find.

Nonetheless, growth is expected to continue in the coming years, despite an economic crisis and a decrease of tourist inflow last year. At the same time, according to the representatives of the Russian consulting agency SMCC, it is clear that the Russian car rental market has little chance to grow to the level of the United States or even the countries in Western Europe, at least in the foreseeable future.

Market Stats

From 2010 to 2014, Russia’s total rental fleet jumped from 13,000 to 27,000 units. About 90% of this fleet total encompasses Moscow, Saint Petersburg and holiday resort area of Krasnodar Krai.

According to estimates from Abarus Market Research, in 2010 the economy segment accounted for about 80% of the Russian rental fleet, while 65% to 70% were cars of Russian brands. Today, the situation has changed — 43% of the overall fleet falls in the business and premium class segments, while the share of foreign auto brands reached about 47%.

The average rental period in Russia varies greatly depending on the region and season. In Moscow, the average is three to five days; in St. Petersburg, it’s five to eight days. In the central region of the country, the average rental period is 10 to 12 days. In general, tourists usually take the car for seven to nine days.

Client profiles vary by region, as well. In the Black Sea resort town of Sochi, 70% of clients are Russian tourists, while in Moscow a significant share of renters are local residents, according to Arina Bochkovaya, head of marketing and sales for Group Ryden, operating in Russia as the general licensee of Dollar Thrifty Rent-e Ka.

According to Bochkovaya, the share of foreign tourists in the overall market is only 7% to 10%. Foreign specialists working for Russian companies make up another 5% to 7%.

The average price of a daily rental — for new foreign cars in the economy class — in Moscow varied from 1.5 thousand to 2 thousand rubles (US$50 to 70). Last year it jumped from 2.5 to 3 thousand rubles (US$83 to $105), based on exchange rates from the beginning of 2014.

The cost of car rental in Saint Petersburg is about the same, while in Krasnodar Krai rates are usually lower by 5%. Rates in other Russian provinces are 10% to 15% lower than that. Prices usually rise at the Russian Black Sea resorts during the height of the season by 30% to 40%. Some companies more than doubled rates, particularly during last year’s Olympic Games in Sochi.

According to estimates from Moscow-based Elex-Polyus, the revenue from one car in Russia is estimated at US$9,000 per year. That may seem low by Western standards, but to put in context, average monthly salaries in Russia in 2015 are 30,620 rubles (US$578) or less than $7,000 a year, according to official state data — making $9,000 per car per year quite profitable. In Moscow and St. Petersburg, salaries are 1.5 to 2 times higher than the rest of the country.

Nonetheless, this revenue is threatened by the devaluation of the Russian ruble — which collapsed twice against the dollar last year. The market also faces a decrease in inbound tourism. According to estimates from the Russian Tourism Association, tourism declined 10% in 2014, and it may fall by another 10% to 15% in 2015 compared to last year, even excluding visitors to the Olympic Games.

Market Trends

A category of the Russian market not found in other markets is “festivity car rental,” occurring for weddings, celebrations and other milestone events. Found in larger cities, festivity car rental usually comes with a driver and additional services. The rental period is usually for one or two days, while the daily rate ranges from 10 thousand to 20 thousand rubles (US$200 to $400). Luxury vehicles such as the Hummer H2 and Chrysler 300C are popular in this segment, as are limousines.

Forecasters say one of the most important trends in the coming years could be the domestic expansion of international rental companies. Today, they occupy 12% to 14% of the market and do not have branches in Russian provinces, nor are they engaged in festivity rentals. It is expected that foreign companies will open branches in cities with more than one million people, such as Kazan, Samara, Volgograd and Voronezh. In 2018, the FIFA World Cup should give impetus to the further development of car rental in those smaller cities.

Nonetheless, foreign companies will face growing competition from the rapidly growing number of domestic rental companies. In 2011, 364 car rental companies were officially registered for business, yet by 2014 this figure jumped 28% to 465. Still, analysts say that the number of market players is growing slower than demand, as more than 60% of these companies are working in the festivity rental segment only.

Growth Barriers

According to representatives of Russian company Rolf-Rental, market growth had been paralyzed by the country’s crime situation. However, in 2009 rental companies received permission to check customers on the database of the Ministry of the Interior, and the number of thefts and serious accidents with rental cars dropped by 50%.

In 2009, the Russian Association of Car Rental Companies was formed. The association is dealing with car thefts by sharing information on bad rentals and conducting joint advertising campaigns. All in all, these changes will bring better margins to the industry, Rolf-Rental says.

According to the analytical agency Folio Research Group, changes such as an ease in rental requirements and the opening of international brands such as Europcar and Hertz — and with it a Western business culture — have stimulated the Russian market.

This growth will be tempered by continuing business impedances particular to Russia, says Alexei Zakharov of the Russian analytical agency Finam. These complications include the bureaucratic procedures surrounding accidents, long repair periods due to a lack of spare parts and a general high level of fraud in the country. High auto insurance also affects profits, particularly for the small companies.

“In Russia, almost half of car rental clients are businesses rather than individuals, and the proportion of ‘car rental for weddings’ is too big,” says Zakharov, who does not see a boom coming for car rental by individuals. “We should consider the Russian market as underdeveloped.”