Daily Management Review

Russians Grudgingly Adopt Chinese Automobiles As Western Brands Disappear


Russians Grudgingly Adopt Chinese Automobiles As Western Brands Disappear
Chinese automakers are stepping in to fill the gap left by the departure of Western automakers, which is forcing Russians to get over their reluctance to support Chinese brands and put up with higher prices.
According to data from the analytical agency Autostat and the consulting firm PPK, Chinese brands like Haval, Chery, and Geely now make up almost 40% of new car sales in Russia, up from less than 10% in January and February of 2022. These companies seized the chance presented by the departure of companies like Renault, Nissan, and Mercedes.
Nonetheless, teething issues do exist. According to industry insiders, Chinese automakers must improve their reputation even as their market share increases. When Reuters spoke to many Russian automobile buyers, both individuals and dealerships, they felt that some Chinese vehicles were of inferior quality than their Western counterparts.
In the wake of Western sanctions imposed after Moscow sent troops to Ukraine in February, Czech automaker Skoda Auto, a subsidiary of Volkswagen Group (VOWG p.DE) and one of several Western automakers with local car production, is in the final stages of an agreement to sell its Russian assets.
During a trip to China in December, Dmitry Medvedev, the former president of Russia, stated on Friday that consumer attitudes were outdated and that cooperation with Chinese industries was beneficial.
"We used to laugh at some of their designs, but I went for a ride in a local car and looked at others," he said. "I'll say bluntly: the car I drove was certainly no worse than a Mercedes."
After they started constructing facilities in Russia in the early 2000s, most Western automakers, who competed with Russian manufacturers for market dominance, stopped operating last spring.
"We've lived our whole lives focused on European, Japanese, American brands and did not especially take the Chinese market into account, which...has developed at an incredible rate," said Vladimir Shestak, general director of Altair-Auto in Vladivostok, whose dealership specialises in the Mercedes-Benz and Geely brands.
Although the bulk of foreign corporations have left Russia or are in the process of departing, some companies' cars are still being sold for the time being due to residual inventories and parallel imports.
The most well-known brand in Russia is Lada, produced domestically by Avtovaz. Prior to the start of what Russia refers to as its "special military operation" in Ukraine, Renault held the largest market share among foreign producers thanks to its former controlling interest in Avtovaz.
Chinese cars are progressively filling the void, but Sergey Aslanyan, an expert in the auto sector, noted that the lack of a reputation still remains a problem.
"Yes, they have almost no competitors here anymore," he said. "But that does not mean that people will change their opinion quickly."
According to data from Autostat and PPK, Chinese brands' market share increased to 37.15% in January-February from 9.48% a year earlier. Sales of brands from Europe, Japan, and Korea that were leaving the market fell from 70% to 22.6%.
However, the dramatic swing coincides with falling new car sales, which fell 58.8% in 2022 as individuals cut back on their expenditures and bought more used automobiles due to decreased living standards and a preference for Western-made cars.
The revival of the Soviet-era Moskvich in Moscow is employing engine parts, engineering, and design from China's JAC, an indication of the two countries' growing cooperation. China's Haval is now making automobiles locally.
The cost is yet another issue that buyers have. Even Medvedev thought the Moskvich's asking price seemed a bit excessive. Around 2 million roubles ($26,195) goes on the model 3. The Lada Granta, the most popular car in Russia, starts at about 680,000 roubles.
"(The Chinese) are bringing in a lot of cars but if we talk about price, not quality, there are no cheap cars at all," said Maxim Kadakov, editor in chief of the "Behind the Wheel" magazine.