Russia Weighing Protectionist Measures Against Chinese Auto Imports

After welcoming Chinese auto imports following Western automakers’ departure from Russia in response to the 2022 Ukraine invasion, a glut of China-built cars has prompted the Russian government to consider protective measures, possibly including tariffs.

The government is pursuing several goals pertaining to the domestic auto industry in addition to tariffs: providing support for flagship Russian automaker AvtoVAZ and persuading Chinese automakers to establish production in Russia.

Sergey Chemezov, a high-profile Russian businessman and head of the industrial and financial conglomerate Rostec, discussed possible protectionist moves in an interview with Reuters.

“After the departure of Western automotive brands, a shortage of cars occurred on the Russian market, and it had to be covered somehow,” Chemezov told the news agency. “By the way, we should thank the Chinese for this...(but) today there is no shortage of cars on the market. I am sure that the state will find a solution. We believe that further imports of assembled cars from China can be regulated through protective measures.”

The government may approve “protective measures” within the next several weeks.

Restrictions on imports of Chinese cars were proposed in May by the head of AvtoVAZ, Maxim Sokolov, who contended that the ever-growing number of Chinese imports was making domestic production noncompetitive.

AvtoVAZ accounted for 352,572, or 38%, of the light vehicles sold in Russia in calendar 2023, according to Wards Intelligence data. The next highest-ranking brands were all Chinese: Chery (206,035), Great Wall (Haval) (141,566), and Zhejiang Geely (84,109).

According to estimates of the Russian automotive agency Autostat, the fleet of Chinese cars in Russia reached 1.86 million units as of July 1, up 28.3%, or 410,000 units, since Jan. 1. The share of Chinese brands in the overall Russian automotive fleet has grown from 3.1% to 4% over the past six months. Among the best-selling models this year are Chery (444,700 units), Geely (341,100) and Great Wall (Haval) (296,000 cars). These three brands account for about 60% of all Chinese cars registered in Russia.

Further imports of Chinese cars to Russia may significantly decline after Oct. 1, when the government increases the utilization fee for imported cars 70%-85% depending on engine volume. The increased fee is intended to make investments in local production more profitable (primarily for Chinese automakers) than exporting to Russia.

However, higher utilization fees will lead to higher prices (up to 15%-20%) for cars in the Russian market, already one of the most expensive in Europe. Automakers and importers both pay the fees, calculated on a base rate of RR20,000 ($229) multiplied by the size of the car’s engine, to the government once a year.

The increased utilization fees are drawing criticism, particularly from dealers. According to the Russian Auto Dealers Assn. (ROAD), only 5%-7% of Russians will be able to buy a new car by 2030, when, they predict, new cars will cost twice what they do today.

So far, ROAD has sent a petition to the Russian government regarding growth of the utilization fees, also called recycling fees. Dealers are asking the authorities to clarify the procedures, conditions and amounts of compensation for automakers planning to start producing cars in Russia.

Representatives of the Russian state remain generally optimistic about the future of the domestic auto market.

Denis Manturov, Russia’s First Deputy Prime Minister, has said domestic automotive production, including commercial vehicles, should grow by 25% this year and exceed 900,000 units.

Sales are also growing at an accelerated pace. According to an Association of European Businesses forecast, 1.45 million passenger cars and commercial vehicles are expected to be sold in Russia this year, up 30% from a year earlier.