With a share of over 40%, Chinese car companies are tapping into the Russian market
Sales of Chinese automobile brands in overseas markets are increasing rapidly. In the first quarter of 2023, China's automobile export volume reached 1.069 million vehicles, a year-on-year increase of 58.7%, surpassing Japan's 1.047 million vehicles in the same period, temporarily ranking as the world's largest automobile exporter.
As the birthplace of the automobile industry, Europe has always been the most important market for Chinese automobiles going overseas. Chinese new energy vehicle companies represented by BYD, NIO and others have made a big move into Europe and have gained initial recognition from European consumers. But the biggest highlight of Chinese automobile brands going overseas in 2022 will be in neighboring Russia-Russia.
Chinese independent brands represented by Chery, Geely and Great Wall have successfully gained a foothold in the Russian market. According to optimistic predictions by local Russian institutions, Chinese brand cars are expected to capture more than half of the market share in 2023 and completely dominate Russia, the second largest auto market in Europe and the eighth largest in the world.
The series of plans for Chinese automobile brands to go overseas launched by Auto Market Ruijian, through changes in export target markets, products, and layout, look at how Chinese automobile brands are opening up new channels for future growth as the domestic market becomes more mature.
▍The "retreat" of international car companies leaves a blank market
Since the outbreak of the Russia-Ukraine conflict, the Russian auto market has suffered a halved sales volume. According to data released by the Association of European Businesses (AEB: Association of European Businesses) in Russia, sales of passenger cars and light commercial vehicles in Russia in 2022 will be 687,370 units, a year-on-year decrease of 58.8%.
A report from the Russian State Higher Economics University shows that Russian automobile production relies heavily on imports. More than half of the added value of the industry comes from abroad. Coupled with the zero-inventory management model adopted to improve efficiency, the impact of sanctions from Western countries will soon fade. Appears in the Russian automotive industry.
According to incomplete statistics from the auto market, mainstream multinational car companies such as Honda, Volkswagen, BMW, Mercedes-Benz, Ford, General Motors, Volvo and other car companies have announced a suspension of exports of cars to Russia. Renault, which has been deeply involved in the Russian market, has sold off all assets in Russia. Car companies including Toyota, Nissan, Mazda, and Ford also followed suit and chose to divest.
After facing multiple rounds of sanctions from the EU and automakers announcing their withdrawal from the Russian market, Russia's auto production has experienced a severe supply chain disruption crisis led by politics. In May 2022, Russian automobile production even fell by 96.7% year-on-year.
Just recently, according to media reports such as Tass and Interfax, the Russian government approved the sale of the Russian assets of German car manufacturer Volkswagen to a division of car dealer Avilon for 125 million euros. This will also It is the final step for Volkswagen to withdraw from the Russian market.
▍Chinese car companies seize the Russian market
After being hit by sanctions, international car companies have basically given up on the Russian market, which has also given Chinese car companies a huge market to fill. According to data released by the Russian Association of European Businesses (AEB), in the first quarter of this year, the share of Russian brands increased from 38.6% in 2022 to 52.2%, but Chinese brands soared from 18% to 42%. Among them, Chinese brands represented by Geely, Chery and Great Wall accounted for 16.5%.
Before 2022, Chinese automobile brands have been working in the Russian market for a long time. Take Great Wall Motors as an example. According to public information, its Tula factory in Russia was completed in 2019. The factory is the first overseas vehicle manufacturing plant of a Chinese automobile company covering the four major production processes of stamping, welding, painting and final assembly. , with a total investment of US$500 million and a production capacity of 150,000 vehicles.
In addition, Chery has adopted the OEM model of joint manufacturing with the local Russian car company UAZ Automobile Factory, while Geely has entered the Russian market through the export model of complete vehicles.
In terms of models, Chery, Great Wall, and Geely also have models in Russia that have replaced the ecological niche of previous multinational brands, such as Haval Big Dog, Geely Xingyue, Chery Tiggo 8, etc. With its similar price and better configuration power, it is quickly occupying the blank market after the withdrawal of multinational car companies.
According to AEB data, except for LADA, which is slightly better than LADA, the rest of the local Russian car companies are basically unable to carry out independent research and development. The technological advantages of Chinese car companies have been highlighted. During the period when international car companies retreated and Chinese car companies filled the gap, Chinese car companies continued to output more advanced and better-designed models and continued to expand their market share in Russia.
However, it is worth noting that due to different regions, the export models to Russia are still mainly fuel vehicles. Russia is a high-latitude country with cold weather and abundant oil, so traditional fuel vehicles still dominate. At the same time, Russia is a country that is highly dependent on oil tax revenue and has little policy support for the promotion of electric vehicles. This has led to the slow promotion of new energy models by domestic car companies in the Russian market, with fuel vehicles still taking the lead.
The good news is that Russia has begun to gradually increase its promotion of electric vehicles, and relevant plans have been introduced. In terms of overall policy, the Russian government has made it clear that it will invest a total of 511 billion rubles (approximately US$8 billion) by 2030, aiming to achieve electric vehicles accounting for 10% of the country's total automobile production by 2030, with a cumulative output of 730,000 vehicles, and supporting related Car purchase subsidies and accelerated infrastructure construction such as charging piles.
The new energy vehicle industry is still a blue ocean market in Russia, and the Russian market may also become a "must compete" for Chinese new energy vehicle companies overseas.
Viktor Zwagelsky, deputy chairman of the Russia-China Friendship, Peace and Development Committee, said in an interview with the media that China is currently almost the only foreign automobile manufacturer in Russia and may "permanently" fill the gap in the Russian automobile market. "Even if we return to the state before the Russia-Ukraine conflict, it will be difficult for international car companies to achieve their original delivery volumes in the Russian market."
