Russia Bans Government Foreign-Car Purchases

ST. PETERSBURG – Russia will ban purchases of foreign cars for government officials at all levels as part of state plans supporting domestic automotive production, according to government sources and local media reports

Historically, Russian government officials and heads of state-run corporations have preferred foreign cars, particularly German brands Mercedes-Benz, BMW and Audi. Toyotas, mainly Camrys along with Ford Mondeo models, have been popular among regional officials. Cars have also been purchased on the state level for local law enforcement agencies and special services.

Russian analysts estimate 30,000 to 50,000 cars valued at $300 million to $400 million were purchased annually by federal and regional government agencies and officials. In addition to official purchases, a number of vehicles are  supplied to Russia via various semi-legal schemes.

For many global automakers, Russian purchases were a major source of income prior to Russia’s invasion of Ukraine in February 2022. Western manufacturers that established production facilities in Russia included Mercedes-Benz, whose Moscow plant had a relatively low output of 25,000 cars per year but sold a substantial number of them on state contracts.

BMW had plans to build a plant in Russia with a possible focus on participation in state procurements, but those plans were derailed by the hostilities in Ukraine.

Car production fell by two-thirds from 2021 to 2022 in Russia, from 1,349,339 to 448,246, according to Wards Intelligence data.

Meantime, due to the production drop and the exodus of Western brands from Russia since the onset of the conflict with Ukraine, government auto fleets are in acute need of new cars. Purchases of both Russian and Chinese cars are under consideration.

 It is unclear which cars could be positioned as Russian-made, as most models currently produced in the country are almost 100% built from foreign parts and are based on foreign brands, primarily Chinese. An example of this is the Moskvich, which is the Russian version of Chinese automaker JAC’s JS4.

Possible options may involve the use of Russian Aurus luxury sedans (pictured, below) or the revival of the Soviet-era ZIL sedan, but production volumes of those vehicles are currently insignificant.

Aurus Senat

According to Russian media reports, a ban on state procurements of foreign cars has already been imposed and could be declared officially within the next several weeks.

Russian analysts believe it will be impossible to ban the use of foreign cars by domestic officials who will continue to use them for personal needs while driving domestic cars to their workplaces.

Another option may involve obtaining foreign cars through various leasing schemes.

The idea of prioritizing purchases of Russian-made cars was put forward in the 1990s by the then-deputy prime minister of the Russian Federation, Boris Nemtsov, who was murdered in Moscow in 2015.

Russian President Boris Yeltsin’s ban on the purchase of foreign cars for government officials, issued April 1, 1997, was simply sabotaged while Yeltsin himself continued to use Mercedes-Benz cars. This led to massive criticism and the ban was lifted two years after its adoption.

The automakers that have ceased building or selling vehicles in Russia since the Ukraine invasion include Volkswagen, Toyota, Suzuki, Daimler Truck, Mercedes-Benz, Volvo and Ford. Renault suspended some operations at its Russian car plants due to logistic bottlenecks since the invasion. Renault has accounted for as much as 40% of Russian vehicle production in recent years. Hyundai Group has been making about 230,000 vehicles per year at its St. Petersburg plant, which has accounted for almost 28% of the country’s production in recent years.

Some moves by automakers have been driven by supply-chain issues rather than trying to make a moral or political statement.