In Russia, one of the largest automotive marketplaces in Europe, there used to be 60 different international car brands. Still, only 11, according to Kommersant, will remain by the end of this year.
According to a Yale analysis, around 1,000 international businesses left the country after Russia invaded Ukraine in February. Global carmakers are among the few foreign companies that have made significant investments in the country to take advantage of the emerging middle class. But because they have all stepped out, this year’s car manufacturing has been at a standstill.
Since November, production has recovered slightly, but the output is still down by about 60%. Without the ability to import auto parts due to the primary producers’ self-sanctioning, most models still in production have declined because they lack features like airbags or onboard computer systems.
The eighth-largest automotive market in the world in terms of global sales volumes, Russia had sales of 1.67 million vehicles from sixteen European automakers, including four of the top 10 by market share. Russia also accounted for 1 in 5 (18%) market leader Renault’s global sales. Now overnight, almost all those foreign firms have packed their bags and left. According to sources, the number of vehicles sold fell by 84% in May, and only 3,000 cars were constructed in June.
The Renault-Nissan joint venture, which controlled AvtoVaz, the business that created the famous Lada, was the largest foreign company to leave the country. Sanctions imposed following the war’s outbreak paralyzed AvtoVaz’s production. Everyone working there will be on leave from April 4 to April 24, 2022.
To save jobs, Renault reportedly sold its part in the automaker to NAMI State Automotive Engineering Institute in April for the symbolic sum of one ruble. As part of the agreement, it kept the right to repurchase its Russian assets within six years.
11 Chinese carmakers remain in the Russian market
According to the Russian Automobile Dealers Association, only 14 brands, 11 Chinese and three domestic, will be available by the end of this year.
Lada, GAZ, and UAZ are the three domestic brands. Chery, Geely, Haval, Jac, Faw, Dongfeng, Changan, Exeed, Gac, Foton, and Omoda are other Chinese manufacturers.
The other significant international participants have likewise withdrawn. For instance, American Ford stopped sending components, engineering, and IT support and stopped working in Russia in March. Ford exited a joint venture with the Russian automaker, Sollers, handing over its non-controlling 49 percent ownership stake to its Russian legal entity in October.
And within a year, Volkswagen of Germany plans to sell its Russian holdings to Porsche, Scania, and MAN. Volkswagen stopped producing automobiles and supplying foreign-made cars to Russia at the beginning of March. Additionally, the business halted operations at GAZ group sites in Nizhny Novgorod.
As the Russian automobile industry begins the enormous task of reestablishing production on the lines under the new ownership, the departure of major foreign corporations has sparked a tsunami of M&A negotiations.
The Central Scientific Research Automobile and Automotive Engines Institute (NAMI) will be the owner of Nissan’s assets. AvtoVAZ will be in charge of management.
The corporation is also researching potential new markets for automobile exports and has its sights set on African nations.
AvtoVAZ may complete the purchase of RN Bank from the Renault-Nissan Alliance by the end of 2022, he added, provided that the procedure proceeds quickly, which will largely depend on the cooperation of the company’s partners.
Before the end of 2023, Russian auto dealer Avtodom plans to purchase the Mercedes-Benz plant in the Moscow region from Germany, according to CEO Andrei Olkhovsky.
As reported by the Russian state media, the Kaliningrad Region of Russia’s Avtotor auto plant has resumed operations and secured agreements to manufacture up to 2,000 new automobiles with three Chinese companies by the end of 2022.