Chinese firms fill vacuum left by western companies in Russia's automobile sector

By Emre Gürkan Abay

MOSCOW (AA) - The Russian automobile sector, from which Western companies have largely withdrawn, is undergoing a profound transformation with the increase of Chinese firms and a focus on local production.

Western automobile companies that were market leaders in Russia until February 2022 announced their withdrawal from the country one after another following the start of the war in Ukraine.

French Renault was one of the first companies to announce its withdrawal from the Russian market, transferring its share in the automobile manufacturer Avtovaz and its Moscow factory to the government for "1 ruble." The factory now produces the Russian automobile brand Moskvich.

Following Renault, Japanese company Nissan also exited Russia, transferring all its assets, including a factory in St. Petersburg and a sales and marketing center in Moscow, to the government. The factory in St. Petersburg now produces automobile models of Russia's state-owned Lada.

Mercedes and Volkswagen are also among the companies that left Russia. It is reported that negotiations are ongoing for joint production with Chinese companies in these factories.

Japanese Toyota, on the other hand, decided to close its factory in Russia instead of withdrawing from the market.

- Automobile sales increased by 160% in August

After the departure of Western companies, automobile sales in Russia came to a halt but started to recover, especially with the increase in exports by Chinese companies to the country.

Russian-based Autostat analysis center said on Tuesday that recovery continues in the automotive sector affected by sanctions in the country.

It added new automobile sales increased by 160% in August 2022 compared to the same period in 2022, reaching 109,700 units. It also noted sales in the first eight months of the year increased by 41% compared to the previous year, reaching 607,000 units.

Avtovaz is the company with the largest share in new automobile sales and Chinese companies Chery, Haval, and Geely have seen the largest increases in sales among foreign companies, Autostat said.

- China and Iran taking lead in Russian automobile sector

Anton Shaparin, deputy chairman of the National Automobile Union in Russia, evaluated the radical changes in the country's automotive market.

He told Anadolu that Western companies tried not to withdraw from the market until the last moment.

Shaparin stated that South Korean companies are still sending automobiles to Russia, and after February 2022, two important trends emerged.

He mentioned that the first trend is the opening of new channels for the shipment of Western automobiles to Russia, both directly and through different countries.

Shaparin said: "Such automobiles arrived in large quantities, especially when the exchange rate was favorable, i.e., when the ruble was strong."

The second trend, according to Shaparin, is aimed at countries that do not support sanctions against Russia, actively seeking opportunities to increase their market share.

Shaparin said: "Primarily, these were Chinese companies. Iranian companies are also making themselves known."

He emphasized that the importance of the Russian market is increasing for many countries, stating that the Russian market has become the main export market for automobiles for China.

Shaparin continued: "For many countries, the Russian market is now a priority. For example, for China, the Russian market has become the main export market for automobiles."

- ‘If political conditions change, situation could reverse’

Shaparin said the Russian market is highly dynamic, and if political conditions change, the situation could reverse.

He continued: "If political conditions change, the situation could reverse. There are still fans of German cars in Russia for a long time. But now we see that the Chinese automobile industry has made a big leap in the last few years and is not only entering Russia but also other European countries."

He added that European automobile manufacturers will face challenges when Chinese electric cars enter the market as a major and serious brand within the next 10 years.

“They will remember the year 2020 with sadness when it was still possible to supply their products to Russia," he said.

*Writing by Alperen Aktas in Istanbul