After the conflict between Russia and Ukraine, as overseas car companies have withdrawn from the Russian market, Chinese independent car companies have ushered in a huge space for development.
Russia has become the largest single market for Chinese car exports in 2023, but since 2024, the growth rate of Chinese car exports to Russia has slowed significantly.
In view of this background, Gaishi Automotive Research Institute conducted a comprehensive scan of the Russian automobile market, focusing on the development of Chinese vehicle and parts enterprises in the Russian market, answering several questions: 1) how big is the development space of the Russian automobile market? 2) what kind of products do enterprises need to create for the local area? 3) where is the opportunity to go deep into the layout? According to the macro situation, Russia’s economic development is quite resilient, but the trend of population aging is obvious.
Its industrial structure depends on energy exports, the manufacturing industry has been gradually strengthened in recent years, and industrial planning promotes the localized production capacity of auto parts.
The Eurasian Economic Union (Eurasian Economic Union) is a regional economic integration organization promoted by Russia, with the free flow of goods, services, capital and labor within its member countries.
in addition, car imports between CIS countries are exempted from tariffs.
Russia has established 31 industrial production special economic zones and stimulated industrial investment through special investment contracts (SPIC).
In recent years, the bilateral trade volume between China and Russia has increased steadily, and RMB settlement has become a trend.
However, the performance of the local business environment is mediocre, and the structural shortage of labor force is highlighted year by year.
Market pattern, industry: after the disintegration of the Soviet Union, the Russian automobile industry gradually lagged behind, and is now in a period of domestic development and import substitution.
After the conflict between Russia and Ukraine, a number of overseas car companies withdrew from the market and sold assets, and vehicle factories have been basically taken over by local Russian companies, most of which have carried out assembly cooperation with Chinese car companies.
In the field of spare parts, the local production capacity is mainly concentrated in low-level products such as tires and seats, and the independent ability of automotive electronics is weak.
after the withdrawal of a number of international parts companies, the production capacity has been acquired and integrated by Russia.
On the market side: Russian car sales were hit hard in 2022 and monthly sales in 2024 have nearly returned to pre-war levels.
Before the war between Russia and Ukraine, the market was dominated by foreign car companies.
China’s own brands accounted for nearly 50% of the market in 2023.
Chery, Great Wall and Geely have performed prominently.
In terms of market segmentation, the local preference for SUV is obvious, and consumption in the large luxury car market is downgraded due to supply constraints.
The development of new energy market lags behind, mostly through parallel imports, subsidies only for domestic production models.
Forecast: the Russian passenger car market is expected to exceed 1.
5 million in 2024, and the market will return to an all-time high of more than 1.
8 million in 2030.
Strategic suggestion: in terms of ① products, focus on promoting the export of SUV products, and optimize product reliability for the cold climate in Russia in winter.
In addition, there is a lack of product satisfaction in the large-scale luxury SUV market.
As for the ② model, in addition to trade exports, we can cooperate with local enterprises to use the original foreign-funded factories they have acquired to carry out KD production.
Strong independent car companies can consider setting up joint ventures with three major Russian automakers (AvtoVAZ, GAZ, Sollers) to achieve long-term localization.
If the production capacity of car companies that originally withdrew from Russia can not be effectively utilized for a long time, independent car companies can consider acquisition and integration.
In terms of ③ channels, Japanese and Korean car brands are similar to Chinese independent brands and can absorb their original dealer network.
high-end independent brands can cooperate with former European and American luxury brand dealers.
In terms of ④ settlement, in response to the risk of bank rejection of Russian currency payments, car companies can explore ways to settle commodities such as oil and get money back from domestic third-party transactions.
① Russian auto electronic components are weak in independence and are pushing forward the localization plan.
Electronic auto parts companies that have already exported Russian KD models can consider setting up factories locally to supply goods locally and expand customers of local car companies in Russia.
Companies in the fields of ② tires, seats, etc.
, can consider acquiring the original multinational parts companies’ factories in Russia to allocate global resources.
The Russian economy has strong resilience, quickly recovered from the negative impact of the epidemic and the war between Russia and Ukraine, and predicted that the overall economy will maintain moderate growth in the future.
Russia has a population of 140 million and a large market, but the aging trend is obvious.
The Russian economy is mainly driven by export-oriented, more dependent on the energy industry represented by oil and natural gas, and is also an important global producer of minerals and industrial metals (palladium, platinum, nickel, etc.). In recent years, the manufacturing industry is also gradually increasing, ranking ninth in the added value of the global manufacturing industry in 2022.
In terms of overall industrial planning, Russia will strengthen the export of scientific and technological products such as machinery and equipment.
for the automobile industry, it will promote the import substitution of automotive electronic components in stages from 2024 to 2025, increase the localization production capacity of spare parts, and plan to account for 10% of the total automobile output in 2030.
Russia signed trade agreements with a number of former Soviet allies and formed a “Eurasian Economic Union” with Belarus, Kazakhstan, Armenia and Kyrgyzstan.
Russia exempts automobile import duties on CIS countries and Vietnam, and levies 25 per cent and 20 per cent tariffs on Chinese-made ICE and NEV & HEV, respectively.
In terms of the business environment, the main problems are corruption of power organs, inefficiency of tax authorities, shortage of professionals, and so on.
With the decline of Russia’s total population and the decline of the economically active population since 2016, the problem of labor shortage has become increasingly prominent.
As of May 2024, Russia has set up a total of 50 special economic zones, including 31 industrial production special economic zones.
In addition, the government uses special investment contracts (SPIC) as a policy tool to stimulate investment in industrial production, providing investors with tax incentives, national orders, financing support, industry subsidies and other incentives.
The Russian automobile industry was relatively strong in the Soviet Union, and its capacity gradually declined after the disintegration of the Soviet Union.
Since 2001, foreign car companies have gradually entered and invested in the construction of factories, and the automobile output has gradually increased, but the production capacity of complete vehicles and spare parts are more dependent on foreign capital.
After the war between Russia and Ukraine, a number of multinational vehicle and parts companies stopped doing business in Russia and sold assets to local companies.
In the field of tires, seats and other spare parts, Russia also promotes the development of its own industry by acquiring and integrating the production capacity of enterprises.
On the whole, the Russian automobile industry is in a period of domestic development and import substitution.
In terms of sales volume, after the conflict between Russia and Ukraine broke out in February 2022, the Russian car marketDue to the withdrawal of many overseas car companies, monthly sales have nearly returned to pre-war levels by the end of 2023, with the increase in local production and the replenishment of imported cars from China.
In terms of market structure, before the Russia-Ukraine conflict, the market was dominated by foreign-funded car companies.
AvtoVAZ, Russia’s largest car company, was also controlled by Renault.
After overseas car companies withdrew, Chinese car companies subsequently stepped in to fill the gap.
In 2023, Russian brands and Chinese independent brands will each be close to 50% market share, and Chery, Great Wall and Geely ranked second, third and fourth.
In terms of new energy, due to the cold climate in Russia, the new energy vehicle market has developed late.
In 2023, the penetration rate will be 1.
2%, and the sales volume will be 14,000 units, most of which are parallel imports.
Gekrypton ranked first in sales, while Russian brand Evolute (mainly assembles Dongfeng BEV models and sells them under different standards) ranked second.
At present, Russia only provides subsidies of up to 25% of the price of new energy models produced in the country, and the amount does not exceed 625,000 rubles (about 50,000 yuan).
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