In a significant shift in the automotive market, Chinese brands emerged as leaders in new car sales in Russia throughout 2023, according to data from the Association of European Business (AEB). This change comes as Western automakers exited the Russian market following the imposition of economic sanctions due to Russia’s invasion of Ukraine in 2022. Amidst these geopolitical tensions, China has stepped up as a key automotive trade partner for Russia, reinforcing their ‘no limits’ partnership declared two years prior.

Strategic Moves by Chinese Brands in Russia

Recent developments have highlighted the growing Chinese presence in the Russian automotive sector. Notably, China and Russia collaborated to produce new Citroën models at the Stellantis-owned Kaluga plant, which had been idled. Additionally, Haval, a brand under Great Wall Motor, initiated engine production at its facility in Uzlovaya Industrial Park, Tula region, early in 2024, with construction beginning back in 2021. Haval Motor Manufacturing Rus committed to investing 42.4 billion rubles ($454 million) into local production under a special investment contract with Russia’s Industry and Trade Ministry signed in September 2020.

2023: A Year of Growth for Chinese and Russian Brands

The Russian automotive market witnessed a significant rebound in 2023, with sales surging by 57.8% to 1.13 million units, recovering from a slump in 2022 caused by the exit of Western companies and economic sanctions. Data from the AEB revealed that Chinese manufacturers like Haval, Chery, and Geely experienced a substantial increase in sales. The sales data for the latter half of 2023 was also augmented by figures from PPC JSC (Passport Industrial Consulting).

Focus on Domestic Brands and Legislation

Lada, produced by the state-owned AvtoVAZ, retained its position as Russia’s best-selling brand in 2023. Efforts to promote domestic vehicle use were bolstered by President Vladimir Putin’s call for legislative adjustments to mandate government agencies and officials to utilize only domestic cars. The Russian State Duma supported this initiative, emphasizing the need for state support for the domestic auto industry. Despite a 40% hike in car prices attributed to low production and increased import costs, AvtoVAZ aimed to ramp up its production to over 500,000 units in 2024. This ambitious target was a response to the challenges posed by U.S. sanctions, which had previously forced the company to adjust its 2023 production goal to 400,000 units.

This marked shift towards Chinese and domestic brands in the Russian automotive market underscores the geopolitical influences reshaping industry dynamics and the strategic adaptations by local and foreign players in response to evolving economic landscapes.