Rise of Chinese car brands in Russia as Western competitors retreat

187

15th February 2024 – (Moscow) The ongoing assault on Ukraine has had far-reaching consequences in Russia, and one unexpected outcome has been the changing landscape of the country’s automotive industry. In the aftermath of the invasion of Ukraine two years ago, several Western and Asian automotive brands made the decision to withdraw from the Russian market. German, American, South Korean, and Japanese companies either ceased their sales, supply, and service operations or opted to sell their assets in Russia. However, this void left by the departure of Western competitors has offered an opportunity for Chinese car manufacturers to step in and expand their presence.

Chinese car firms, including Geely, Chery, and Changan, have seized the opportunity to fill the gap left by their Western counterparts. As a result, the Russian market now boasts a wide range of over 100 Chinese car models. Previously, Russian consumers tended to opt for Japanese or German cars, overlooking Chinese offerings. However, with limited choices available, attitudes towards Chinese cars have shifted. Sergei Tselikov, director of analyst firm Avtostat, noted that consumers are now actively considering and choosing Chinese cars, a shift in preference from previous years.

The market share of Chinese car models in Russia has experienced significant growth over the past two years. In 2023, Chinese models accounted for over 40% of all new car sales in Russia, a significant increase from less than 10% just two years ago. Correspondingly, the number of dealerships selling Chinese cars has more than doubled, rising from 31% to 65% in 2023. Many of the factories that were previously utilised by Western car manufacturers have now been taken over by Chinese counterparts.

The surge in Chinese car exports to Russia has positioned the country as China’s largest export market for cars. According to Chinese customs data, between January and October last year, Russia imported Chinese cars worth a staggering US$9.4 billion. This figure is nearly ten times the US$1.1 billion worth of car exports to Russia during the same period in 2022.

Russian car brands have also become increasingly reliant on Chinese components. Luxury car dealer Avtodom’s CEO, Andrei Olkhovsky, highlighted that many vehicles previously believed to be historically Russian are, in fact, predominantly Chinese cars with new labels or vehicles with a significant composition of Chinese components.

While domestic car production in Russia is yet to gain momentum, Russian car brands do possess an advantage. In an industry that has witnessed price hikes globally, Russian brands have managed to keep their price growth closer to the overall inflation rate.

Contrary to popular belief, Chinese cars sold in Russia are not necessarily cheaper. In fact, the average Chinese car sold in Russia is priced at twice the amount it would cost in China. However, experts predict that this trend may reverse in the coming year. Currently, large dealerships in Russia are fully stocked with Chinese cars. With a healthy supply available, it is anticipated that slower price growth and significant discounts on Chinese models will make these cars even more attractive to consumers.