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Carmakers force smiles at Russia's lacking car show

MOSCOW -- The latest models gleam at the Moscow car show, but Russian sales have dropped because of the Ukraine crisis and the shine has gone off a key growth market.

Hostesses in cocktail dresses and high heels fawn over the cars as they do every year, and sober-suited executives boast about the newest features, but the smiles seem somewhat forced at this edition of the Moscow International Automobile Salon.

More than one million people are expected to visit the show, which closes on Sept. 7, but Russians are doing more looking than buying, to the disappointment of carmakers.

In recent years Russia has become an important growth market for many automakers, and in 2012 it became Europe's number two market behind Germany, with 2.9 million vehicles sold.

Carmakers were already expecting a fall in sales as Russia's oil-fuelled growth boom of the previous decade exhausted itself. But the conflict in Ukraine has sent the market into free fall.

Rising tensions between Moscow and the West have pushed the Russian economy to the brink of recession, and as the uncertainty persists consumers are hesitating before making big purchases.

Sales Plunge

The slow slide of the ruble is also pushing up prices on foreign cars.

According to the Association of European Businesses (AEB), which compiles car sales figures in Russia, sales plummeted by 23 percent in July from the same month a year ago.

No-one is expecting a quick rebound and carmakers are instead looking further into the future: Russia's emerging middle class is still under-equipped for wheels.

The situation is “very challenging, but we believe in a recovery in the demand in the future,” said Yong-Key Koo, who heads up operations for South Korea's Hyundai Motors in former Soviet states.

Opel, the German unit of U.S. auto giant General Motors (GM), says Russia is key to its ambitions to become Europe's number two carmaker by 2022.

“Our objectives in Europe cannot be achieved without Russia,” said Matthias Seidl, Opel's executive sales director for central and eastern Europe.

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