Russia Weighing Ban on Car Imports From U.S., EU, Japan

ST. PETERSBURG, Russia – The withering Russian auto market could shrink further due to plans by the government to ban car imports from the U.S., European Union and Japan in response to sanctions imposed on the country by the West.

The ban also may apply to trucks and buses.

The Russian government in July halted purchases of imported cars for state needs. According to Vladimir Gutenev, first deputy chairman of the Duma (Parliament) Committee on Industry, the ban could be extended to private-sector importers of vehicles priced below RR800,000 to RR900,000 ($21,600 to $24,300) and possibly expanded to all imports from Western countries that enact new sanctions against Russia.

The EU has said it may amend its sanctions if it receives evidence Russia is holding to the peace plan designed to halt fighting between pro-Russian rebels and the Ukrainian army in eastern Ukraine, The Wall Street Journal reports. The Kremlin has denied militarily backing the rebels.

Prime Minister Dmitry Medvedev recently said Russia is ready to adopt protective measures in the domestic auto industry that will take into account “Russia’s own opportunities.”

According to Russian Ministry of Industry and Trade data, imports comprise 27% of all car sales in the country; trucks, 46%; and buses, 13%. The largest exporter of cars to Russia is Japan, accounting for 183,000 units of the total volume of 792,000 in 2013. Japan also has imposed sanctions.

The second-biggest importer is the U.K. (112,500 units), followed by Germany (92,000). Russia accounts for 3% of the total volume of cars built in Germany.

An expanded ban on car imports likely would have the greatest effect on global automakers without production capacity in Russia, including Mercedez-Benz, Honda, Suzuki and Volvo.

In contrast, representatives of Nissan, Toyota, Ford Sollers, KAMAZ and Renault say Western sanctions have not curtailed their business.

Automakers from countries such as South Korea and China, which have not imposed sanctions, could benefit significantly from such a ban. However, Russian analysts note, an influx of inexpensive Korean and Chinese cars could further depress sales of low-cost models from local manufacturers such as AvtoVAZ.

Sanctions and general economic instability in Russia already have cut into sales by some global manufacturers, particularly premium automakers such as BMW, which reports its deliveries in the country are down 12% year-to-date.

Overall Russian new-vehicle sales in August dropped 25.8% from like-2013 and were off 12.1% year-to-date, according to the Association of European Businesses Automobile Manufacturers Committee. The AvtoVAZ-built Lada was last month’s sales leader despite a 32% plunge from year-ago, and deliveries were down 18% after eight months.

A ban on imports from nations that have sanctioned Russia could have long-term negative effects, according to Ministry of Industry and Trade analysts. Shipments mainly from South Korea and China, coupled with declining sales of local models, could give imports a 67% share of the Russian market by 2020 – compared with the current 27%.

Moreover, a shrinking local market would make it unprofitable for South Korean and Chinese automakers to maintain production in Russia.

Sources within the Ministry of Industry and Trade who asked not to be identified for fear of dismissal say the worst-case scenario would involve a ban on imports of auto parts which, in turn, could halt operations at most Russian assembly plants, including those operated by global automakers.