Russian Auto Industry Swamped by Flood of Chinese Imports

Chinese automakers are exporting increasing numbers of cars to Russia at the expense of local manufacturers in general and flagship brand AvtoVaz in particular.

The government has raised recycling, or salvage, fees on imported vehicles, but that hasn’t deterred China from aggressively expanding into Russia, says Maxim Sokolov, the head of AvtoVaz.

AvtoVaz sold 352,572 vehicles in 2023, an 86.9% increase from 188,645 in 2022, according to Wards Intelligence data. But AvtoVaz’s total was nearly matched by the two biggest Chinese importers, Chery and Great Wall, whose 2023 sales jumped 283.6% and 301.2%, respectively. China’s Zhejiang Geely was Russia’s fourth largest-selling brand in 2023 with a 244.1% year-on-year increase, Wards data shows. 

“Many Chinese brands, during their aggressive expansion into the Russian market, are breaking through the existing recycling fee and entering traditional segments… where our models historically dominated,” Sokolov says.

The Kommersant business paper says experts with the Russian Duma’s (Parliament’s) Committee on Industry and Trade predict domestic automakers will be forced to cut car production up to 50% if large discounts on Chinese cars reduce demand for Russian cars.

“In such a situation, Russian companies will be forced to produce only low-tech obsolete products, will not be able to finance R&D and the development of their capacities, and create new high-tech jobs. All this will have a negative impact on the achievement of technological sovereignty and industrial growth,” AvtoVaz says in a statement.

Chinese automakers are circumventing the higher recycling fees by deeply discounting their products. Prices for AvtoVaz’s Lada Vesta and the Moskvich, a Soviet-era small car reintroduced in 2022, have been cut as well.

Analysts say the Russian government has failed to persuade Chinese manufacturers to establish local production. The analysts also say the Chinese companies are balking at transferring production to Russia because that would mean cutting jobs in China and risking a negative reaction from their government.

Stepped-up competition with China may force AvtoVaz to revise its expansion and production plans. The automaker initially said it had targeted 2023 output at 500,000 units, achieved largely by expanding its plant at Izhevsk, where a new Lada Largus with a gasoline engine will be produced.

Some Russian analysts agree with AvtoVaz’s Sokolov that additional strict measures to protect the domestic auto industry are needed. Those might include the imposition of mandatory levels of localized production or further increases in recycling fees. The latter option, however, likely would raise prices of not only Chinese cars but also Russian ones, which already are at their highest levels in 30 years.

According to the Russian statistical agency Avtostat, the average price of a new passenger car in Russia in 2023 was 2.96 million rubles ($32,000), which is 150% higher than two years ago.

Dongfeng model from China on display at Russian auto show in October 2023.