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Chinese brands thrive in Russia following exodus of Western firms

Chery Tiggo 7 Pro Max front quarter tracking
Chery Tiggo 7 Pro Max front quarter tracking

The Chery Tiggo 7 Pro Max leads Russia's import rankings

China has comprehensively taken over the Russian car market after stepping in to replace Western car makers following Russia’s invasion of Ukraine.

Chinese companies such as Great Wall Motor, Geely and Chery are importing models to the country as well as co-operating with the Russian government to restart the country’s once-thriving car manufacturing industry.

As a consequence, Russian car sales are booming again, with sales up 75% so far this year, at just over 700,000, according to the Association of European Businesses (AEB) in Russia.

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Of the 130,715 new cars sold in June, 69,400 were imported from China, the AEB said. Russia is now China’s biggest automotive export market.

Leading the import list was Chery Tiggo 7 Pro Max, followed by the Changan CS55 Plus and the Omoda C5, another Chery-brand model. All are SUVs.

Other Chinese cars are made in Russia, or partly made anyway. Among the world’s global car-making countries, China is alone in its willingness to overlook Russia’s warmongering in Europe, giving Russia little choice but to turn to its southern neighbour to help rebuild its car industry.

Car plants bought from departing companies such as Volkswagen are creaking back into life to assemble Chinese knocked-down kits. Renault's old Moscow plant was first to restart, screwing together knocked-down cars from JAC and giving them Moskvitch badging – a revived Soviet brand last made in the plant in 2002.

From making Renault-branded Dacia Dusters and Renault Arkanas, the plant now assembles a range of JAC-sourced Moskvich models and will add another SUV (the 8) in October, the company said.

Another Soviet zombie brand on the revival path is that old favourite of the mid-ranking Soviet apparatchiks, Volga, which will be given new life as a Changan rebadging.

The range is expected to be built in the same Gaz facility in Nizhny Novgorod that originally built Volgas but until the Ukraine war had a profitable run as a contract manufacturer for Volkswagen.

Another contract manufacturer, Avtotor, which previously built BMWs, Hyundais and Kias in Kaliningrad, is now assembling cars from kits supplied by a range of Chinese car companies including BAIC, DFSK, Foton, Jetour, JMC and SWM.

The old Volkswagen plant in Kaluga meanwhile is due to restart work on 1 August, Avtostat has reported. No automotive tie-up has been announced, but it will almost certainly involve a Chinese partner.

Russian authorities have publicly expressed their annoyance that these are mostly just screwdriver operations, with very little of the car actually supplied by Russian parts makers. Employment levels are well down from the pre-war days, when plants would stamp, weld, paint and assemble cars, requiring workforces into the thousands.

They hope these Chinese-enabled operations will eventually once again restore the Russian car industry, but sanctions mean that unless China is fully on board, it will be a slow path back to any kind of normality.

Official imports and the kit plants are mainly supplying cheap replacements for the core budget models from the likes of Renault, Hyundai, Kia, Skoda and Volkswagen – cars that vied with local favourite Lada for top 10 slots.

The Russian brand is still the market leader, with a share of 28% in June on sales of 34,200 vehicles.

However, Russia is sorely missing cars from the luxury end of the market and is now forced into sourcing so-called 'parallel imports' of their favourite BMW, Range Rover and Mercedes-Benz models, among others. These are imports not officially sanctioned by their makers but allowed by Russia under Decree #506, which gives importers legal protection from claims against them from intellectual property holders.

That has led to a booming trade in luxury motors particularly from neighbouring countries such as Kazakhstan. These “alternatively sourced” cars accounted for 18% of the market in the first half the year, according to the AEB.

British luxury car makers have been accused of turning a blind eye to these parallel imports. Cars are now all of a sudden the number-one exported good from the UK to Kazakhstan, topping the list of last year with models worth £29.5 million, figures from the Department of Trade and Business show. In the first quarter of 2022, prior to the Russian invasion, cars didn’t make the top five of exported goods to the country.

Car companies are maintaining links with Russia via service centres to look after models already on the road. JLR, for example, lists almost 50 service centres and even still lists a Jaguar Land Rover Experience driving centre in Moscow.

Chinese premium EVs are also starting to penetrate the market, with Geely’s Zeekr brand a top choice. More than 8000 Zeekrs have been sold in Russia since June last year, Reuters has reported one Moscow dealer as saying.

A sophisticated website and a network of dealers have sprung up for the EV specialist, although they now make it clear these aren't official Zeekr operations. The prices reflect the tortuous route they take: the 001 fastback starts at the equivalent of £55,000 in Russia, against £29,000 China.

Zeekr itself says it comes down hard on dealers in places like Kazakhstan that ship into Russia. “They have a clear contract restriction: they are not allowed to sell to Russia because of the sanctions," Mars Chen, Zeekr's head of overseas markets, told journalists in April.

Japan meanwhile has become the number-one source of used cars into Russia. In the first six months of this year, 177,800 used vehicles made their way into the country, of which two thirds came from Japan, according to AEB figures. The top three used imports were the Honda Freed, Toyota Corolla and Honda Fit (Jazz).

Russians however are missing the extra development work that went into locally built cars to ensure they survived Russia's often brutal roads and weather. Complaints levelled at Chinese imports include corrosion, parts failures and general unsuitability for the conditions.

Russia was once a prime target for European car makers eyeing up a market that once had the potential to overtake Germany as Europe’s biggest. The market has recovered this year as more Chinese supply comes through, with the AEB upgrading its estimate to 1.45m for the whole year from 1.3m after noting the boom in the first six months.

That Russia has returned to anything like the numbers achieved pre-war is entirely due to a new and very one-sided relationship with Chinese car makers.

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