Russia’s car industry is in trouble: figures confirm collapse

Car prices rose by about 40% in March as carmakers from Toyota to VW stopped production.

Car sales in Russia fell last month as sanctions over the invasion of Ukraine hit the ruble and many global car companies joined the boycott of the country, leaving buyers facing empty showrooms.

Sales of new vehicles fell by 60% in March compared to the previous month at Rolf, Russia’s largest dealer, according to CEO Svetlana Vinogradova. She estimates that demand will halve this year, at a level similar to Spain, which has a third of Russia’s population.

The decline in Rolf was in line with the general market, which fell by 63 to 55,129 units, the European Affairs Association said. Russia’s first-quarter sales fell 28 percent to 277,332 units, according to the US.

The collapse of car sales comes with consumers shifting their spending to essentials as they prepare for a war-torn recession. Vehicle prices are estimated to have risen by 40% in March, while carmakers from Toyota to Volkswagen have halted production in Russia as part of an unprecedented international boycott.

High prices

As buyers face higher prices and fewer options, the government is trying to boost domestic production.

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Cars imported from Europe and Japan can be replaced with Chinese and Indian models, according to Anton Shaparin, vice president of the National Automobile Union.

“Many people say that our Chinese comrades will not leave our market,” said Shaparin, noting that prices for Great Wall Motor’s Haval cars assembled in Russia have risen 50 percent since the invasion. “Of course they won’t, they’ll milk it to the last ruble.”

This contrasts with manufacturers from Ford Motor to Honda, which no longer deliver vehicles or spare parts to Russia.

The Renault Group has suspended operations in what is the second largest market and warned that it could reduce the value of its business.

The high dependence of local car manufacturers on imported components has also led to the shock of stickers. The largest domestic manufacturer, AvtoVAZ, owned by Renault, has increased its prices three times this year.

Russia’s Federal Statistical Service said last week that foreign car prices had risen 29 percent since the beginning of the year.

China, the big winner

With new cars hard to find in Russia and the acceleration of inflation that threatens to devalue their economies, some Russians have turned to neighboring markets that have left them open.

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Russian customers accounted for about 10 percent of sales at Autodom in the Kazakh city of Kostanay, 180 km from the border, according to Yevgeniy Biber, the dealer’s head of sales.

Previously, they accounted for about 1 percent of buyers, he said.

Even before the crisis, Russia was already struggling with a shortage of new cars due to supply chain disruptions and distribution delays that the automotive industry faced globally.

Sales of new cars in Russia fell by almost 50% last year from a peak in 2012 as the economy stagnated since the annexation of Crimea by Ukraine in 2014.

Against the background of the lack of parts needed to keep factories open, Interfax reported that AvtoVAZ intends to introduce a reduced version of its Lada brand, made with a minimum of foreign parts, such as airbags and anti-lock braking systems.

Vehicle sales in March were among the weakest in 15 years, according to Azat Timerkhanov of the Russian consulting firm Autostat.

“If Europe does not resume deliveries, China will be the main beneficiary, at least in terms of market share,” Timerkhanov said. “But volumes will continue to fall.”

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