Russia Auto Sales Tank Amidst Sanctions


Russia Auto Sales Tank Amidst Sanctions
Newly assembled Lada brand cars ready for sale at an Avtovaz Group automobile plant in Izhevsk, Russia. © Tikhomirov Sergey

New car and light commercial vehicle sales in Russia plunged almost 60% in 2022 as the war in Ukraine ramped up economic sanctions against the country, disrupting logistics of importing automotive parts and leading foreign car makers to exit the country.

Foreign car brands operating in Russia – primarily Western, Korean and Japanese companies – exited the market to protest against Moscow’s aggression against Ukraine.

Domestic automakers – such as Avtovaz, Uaz, Gaz and Kamaz – underperformed in 2022, after the import of Western automotive components and equipment needed for their operation ended, according to a market observer. Vital component of any automobile are lubricants, hence Russian lubricant market is also due to be affected.

“This slump [of the automobile sales] will affect the engine oil market as well, not at once, but gradually,” Victor Pushkarev, senior analyst at Autostat, a Moscow-based firm consulting on the Russian automotive industry, told Lube Report last week.

“The engine oil market is expected to decrease as a result of the prevailing trend of withdrawal of old cars from the roads,” Pushkarev said.

Published official data for engine oil consumption in Russia in 2022 is not yet available, but prior to last year, Russia usually consumed around 500 million liters (450,000 metric tons) of engine oils per year. In 2019, the country’s passenger and light commercial vehicle motor oil consumption reached 530 million liters, according to Russian Automotive Market Research, a consultancy.

In 2022, new passenger and light commercial vehicle sales decreased by 59%, compared to the year before, according to the Association of European Business in Russia. Last year 687,370 units were sold in the country, compared to 1.7 million units in 2021.

After the start of the war in Ukraine. all foreign automakers in Russia halted their operation. Many later announced their exit from the market and the sales of their assets. Among those who permanently closed their production lines were Germany’s Volkswagen and France’s PCMA Rus in Kaluga, where assembly of Peugeot, Citroen, Opel and Mitsubishi was taking place.

Also, Japanese automaker Mazda closed its factory in Vladivostok, and Germany’s Mercedes-Benz stopped operation at its plant near Moscow, while Japan’s Nissan and Toyota left its St. Petersburg production lines. French automaker Renault’s ex-plant in Moscow and the facility of Avtotor in Kaliningrad – which produced South Korean, Japanese and American brands – now assemble Chinese cars.

By the end of 2022 only 16 out of 60 car brands remained in Russia. Only three of them were domestic – Lada, Gaz and Uaz. The remaining are Chinese: Chery, Geely, Haval, Jac, Faw, Dongfeng, Changan, Exeed, Gac, Foton and Omoda.

Autostat said domestic car makers experienced a huge production slump in the first two months of 2023. In this period Russian car makers produced almost 54,000 units, 74% less than in the same period in 2022. The best-selling brands were Lada Granta, the sport utility vehicle Lada Niva and the Chinese crossover Haval Jolion.

Sales of new passenger cars also dipped in the first two months of 2023, at almost 42,000 units, down 63% compared to sales in the same period last year. AvtoVaz, the maker of Lada, is expected to gather up to 50% of the Russian new passenger car sales in 2023, and the combined market share of Chinese brands is expected to rise above 25% of total new car sales.

The association expects the Russian car and light commercial vehicle market to gain some ground in 2023, with sales projected to increase to 770,000, a 17% increase compared to 2022.

“But no one in the world can tell what awaits us in the current situation,” Alexei Kalitsev, chairman of the AEB Automobile Manufacturers Committee, said at the association’s annual press conference in January.

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