Fall of the Russian car empire: Newbie 'commanders' look for China alliance
- Taking over operations of global brands that exited Russia post Ukraine invasion may have been easy. Profits, however, are another story.
Russia's annual car output was around 1.5 million units. Then came its invasion of Ukraine, prompting global brands to shut shop and ship out. And while the invasion has had wide-reaching ramifications on the economy of the country, the automotive industry has taken a severe hit in particular. Now, a revival with the hopes of Chinese help is planned. But will it come?
When global brands like Hyundai and Mercedes exited the Russian market, their factories and operations were taken over by local entrepreneurs. It may have seemed like a great deal at the time because these brands were quick to move away in the aftermath of Russia's invasion of Ukraine in February of 2022. Several international sanctions imposed on the country remain in effect till date. But while options for new cars fell drastically, Chinese companies moved in to plug the wide gap and walk away with profit. And it is this profit on China-made cars sold in Russia that these brands would look to focus on.
Also check these Cars
1197 cc
Petrol
What could it mean for local Russian entrepreneurs who are looking at restarting operations within the country? Seeking help from Chinese automotive companies would be obvious but analysts believe that these same companies would more likely continue to ship out their vehicles from China rather than enter into partnerships in China.
China and Russia do not have formal treaty alliance as far as the governments are concerned. But both countries are close economic partners. Bloomberg recently quoted a Russia-based independent consultant as saying that Chinese auto companies with a Russia presence may not be inclined to make their cars in Russia. “Finished products from China are more profitable when shipped and sold in Russia rather than the same cars made in Russia," explained Sergey Burgazliev.
Russia saw sales of around one lakh cars before its invasion of Ukraine. This has fallen to a fraction since 2022 with factors like low supply, high prices and an overall mute consumer sentiments playing a big role. While local brands have seen an uptick in demand for their respective models, the options are as few as supply.
