China leads global car sales after taking over Russian market – News.Az

By Asif Aydinli

Following a complete halt in the months following the invasion of Ukraine two years ago, Russia’s automotive industry has nearly fully recovered and is projected to sell 1.3 million cars this year. Over the past two years, Russia has seen a 49-percent rise in car prices as new cars have become more expensive by an average of nearly 1 million roubles, which is almost 1.5 times higher than their previous prices. And this trend continues to escalate.

It is important to note that сar exports from China in 2023 totaled 4.91 million units , according to TASS citing China’s Ministry of Industry and Information Technology. As a result, China has become the world’s largest car exporter for the first time, surpassing Japan in this category. Compared to 2022, car exports from China increased by 57.9%. At the same time, the Ministry noted that car production in the country increased by 11.6%.

In the current situation , Chinese cars are gaining popularity in Russia. According to a survey conducted by Rambler&Co media holding and SberInsurance analysts, one in three Russians is ready to switch to a Chinese car. This was stated by 32% of the respondents, while 20% noted that they are well acquainted with the Chinese brands available on the Russian market and their models. Another 44% said they do not understand the details of the Chinese automotive industry, while 36% declared that they know nothing about Chinese cars. One in ten respondents owns a car from China, and 55% have acquaintances who drive such cars.

This figures are not surprising, considering that, in recent years, the demand for Chinese cars in Russia has tripled. After the departure of foreign car brands, especially in the mass segment, neither local production nor parallel imports have been able to meet the demand. As a result, Chinese cars have flooded the Russian car market. In 2023, cars of Chinese brands accounted for more than half of the Russian market, with almost 60 different brands represented. Officially operating Chinese brands offered Russians almost 100 new models in 2023.

Incidentally, in 2023, China became the world leader in car export. Russia accounted for 162,000 cars for the entire year, a record figure — the share of Chinese cars in Russian imports soared from 10% in 2021 to 92% in 2023.

Chinese companies are not new to the Russian market, but today they are entering the market under fundamentally different conditions: Western manufacturers have vacated almost all niches, competition has been minimized, and the overall market situation and the prevailing deficit allow businesses from China to impose their own conditions.
Russia’s largest automotive enterprises such as Avtotor, AvtoVAZ, and UAZ have been forced to suspend production due to a shortage of foreign parts and components. As a result of sanctions imposed in March 2022, nearly half of the plants manufacturing passenger and light commercial vehicles in the country have remained idle.

Consequently, the market has seen a sharp decline in the variety of available models, higher prices, and lower sales. The vacant niches in production and export deliveries have been taken over by Chinese companies.

However, there are significant problems in this process. Despite their popularity, owners of Chinese car models in Russia have encountered three main issues: corrosion due to sharp temperature changes and aggressive road agents; drive shafts made from soft metals that are not designed for heavy transverse loads; and suspensions that fail under load at mileage from 70,000 km. It should be noted that most Chinese models are limited to a lifespan of 200,000 km, which corresponds to approximately 10 years of service.

According to a warning issued by AvtoVAZ, the Russian automotive industry is facing a serious threat due to competition from Chinese manufacturers. The expert council led by AvtoVAZ President Maxim Sokolov suggests that Russian automakers might see a decline in production by up to 50% due to Chinese expansion and decreasing demand for locally produced vehicles. Sokolov noted that Chinese automakers are offering Russians discounts that are 2-3 times the size of the recycling fee, thereby stimulating the purchase of their products.

One solution to this challenging situation is the localization of production. The Kaliningrad-based factory Avtotor has started manufacturing Chinese models . In Tula Region, a new production site, which opened for Haval (a subsidiary of the Great Wall Motor) in 2019, is gaining new momentum. Chery is considering starting its own car production or opening a factory on a partnership basis.

Additionally, Russian manufacturers are contemplating the production of Chinese vehicles. Evolute electric cars produced in Lipetsk Region, Sollers vans assembled in Tatarstan, the Moscow-based Moskvich plant, as well as Lada X-Cross 5 crossovers made near St. Petersburg are currently assembled from Chinese kits with varying degrees of localization.

The Russian market is very important for China, as it represents the first significant example of Chinese automotive manufacturers expanding outside their own country. In the current realities, Russia is of interest to Chinese automobile business as a launchpad for entering the largest global markets and to face off against powerful European and American auto corporations.

Currently, in Russia, there are virtually no alternatives to Chinese cars except for several Korean models . Moreover, the absence of competition, which allows for maximum profit from direct sales, does not make it possible to mass-produce Chinese car in Russia despite their aforementioned shortcomings on the Russian market.

News.Az