Russia's Car Market Could Fully Recover by 2030

Russia’s car market will fully recover to pre-pandemic levels by 2030, according to Deputy Prime Minister and Industry and Trade Minister Denis Manturov in an interview ahead of St Petersburg International Economic Forum (SPIEF).

The car business came to a screeching halt after the invasion of Ukraine as the international companies began to pull out and part imports disappeared. By the end of last year, only 11 foreign car brands were left in Russia from over 60 previously – and most of those were Chinese.

The Russian government has been working hard to revive the sector, a major source of employment in several important cities. Manturov says the sector is in line with a car industry strategy that runs through 2035, with a target for passenger cars and light commercial vehicles (LCVs) production to regain pre-pandemic levels by 2030.

This year, sales have begun to recover but remain at 60% of pre-war levels while the supply problems are gradually being resolved. Leading Russian carmaker AvtoVAZ also plans to export 10,000–15,000 Lada cars in 2023, according to the company CEO Maxim Sokolov who also highlighted that the 2024 export plan is about 50,000 cars.

The ministry has been heavily involved in the sale of previously foreign-owned automotive assets as they employ thousands of people which politicises the deals. But after investing hundreds of millions of dollars into their car plants, many of the departing international companies have included buy-back clauses to allow them to return to the Russian market should relations between Russia and the West normalize in the future.

Manturov mentioned that foreign companies like Renault, Mercedes-Benz, and Nissan, who have left Russia, all have buyback options as part of their deals. The ministry would be involved in these deals should they happen, but Manturov said each one would be negotiated on a case-by-case basis. However, the plants of many Japanese automakers including Toyota were sold without a buyback option.

China which has already overtaken Japan to become the world’s #1 car exporter has two car plants in Russia. With a 58% year-on-year increase in car exports, Russia is playing an important role (for Chinese automakers) in the change. At the same time, Iran has been a big winner from the emptying out of competition in Russia’s car market. Iran’s second-largest automaker by volume, SAIPA, is set to arrive on the Russian market following the signing of a breakthrough agreement to import 45,000 cars to Russia. As Iran has been under sanctions for years, it is now stepping in to help Russia revive its stalled car production through cooperation between each country’s leading carmakers.

While the car market is about half what it was pre-war when carmakers were producing around 150,000 cars a month, sales have started to rise again this year as demand returns and real incomes rise. The CEO of Russian carmaker AvtoVAZ, Maxim Sokolov says sales in Russia’s car market could recover to 875,000 by the end of this year, clawing back much of the losses caused by the pullout of all the international producers based in Russia.

The sales of new passenger cars and light commercial vehicles (LCVs) in Russia witnessed a 162% increase to 72,171 vehicles sold in May, compared with a paltry 27,458 in May 2022, according to the latest report of the Association of European Businesses (AEB). Russian producers are hoping to make new inroads into the market by producing 100% locally made models and intend to more distinctively brand the cars as Made-in-Russia.

Source: IntelliNews

UsmanAnsari

A computer animation professional with over 23 years of industry experience having served in leading organizations, TV channels & production facilities in Pakistan. An avid car enthusiast and petrolhead with an affection to deliver quality content to help shape opinions. Formerly written for PakWheels as well as major publications including Dawn. Founder of CarSpiritPK.com