Affordable Cars Becoming Rare in Russia

ST. PETERSBURG – Cars are becoming increasingly unaffordable in Russia, where prices have doubled or even tripled in recent months amid product shortages and a weak ruble.

Leading Russian auto dealers are warning of a new wave of price increases by the end of summer when stocks of imported cars will have been largely depleted. According to Autonews magazine, every shipment of cars to Russia carries higher prices.

One BMW showroom displays new X5, X7 and 7-Series cars from Europe which are priced between RR15 million and RR20 million ($181,000-$242,000). The base price for a BMW 7-Series in the U.S. is $95,700.

Low- and mid-priced cars are unprofitable in part because of high logistics costs incurred by importing them through countries including Kazakhstan, United Arab Emirates and Georgia. Prices for premium cars are being driven up by various intermediaries and re-sellers trying to maximize profits.

Despite the economic crisis in Russia, demand for premium cars remains high, as there are still customers ready to pay more for BMW, Mercedes and Audi models rather than Chinese makes.  

In the case of Chinese cars, prices also are rising despite the lack of any obstacles impeding their export to Russia. For example, the battery-electric Voyah Passion sedan (pictured, below), which went on sale in the Russian market in May, is priced at RR8.3 million ($98,800), but many industry analysts expect its price to increase within weeks.

Voyah Passion

Russian-made cars including the recently re-launched Moskvich also are becoming more expensive, even though their real market value often does not correspond with the prices set for them.

Finally, prices are rising for so-called parallel imports of European cars reaching the Russian market not through manufacturers and established distributors but through third parties.

Reasons for the price increases are related, to varying degrees, to Russia’s conflict with Ukraine.

These include growing difficulties with transferring money from Russia to Europe; deepening logistical problems, such as mutual restrictions on road transport between Russia and Poland; and global automakers’ efforts to comply with sanctions by limiting supplies of their cars reaching Russia via parallel imports.

Russia’s current auto market is reminiscent of the Soviet era when cars were considered luxury items most consumers could not afford.

With average new-car prices among the world’s highest, analysts expect Russian consumers to take on loans at a rapidly growing rate, or else opt for used cars.

Light-vehicle sales in Russia totaled 293,509 from January through May, a 13.6% decline from 339,629 a year earlier, according to Wards Intelligence data. But sales in May alone increased 138.8% to 64,120, with domestic automaker AvtoVAZ accounting for 37%. The next three best-selling brands were Chinese.