China’s Growing Influence in Russia’s Auto Industry
WHAT YOU SHOULD KNOW
- The relaunch of the classic Soviet-era Moskvich car by a state-owned company highlighted China’s growing influence in Russia’s auto industry.
- Formerly owned by European, Japanese, and U.S. carmakers, six factories in Russia are now producing Chinese models or have plans to do so.
- Russia’s domestic car production has significantly declined in recent years, with domestic cars now accounting for less than 40% of the market, down from 70-75% before the Ukraine conflict.
In November, a state-owned company relaunched the classic Soviet-era car, Moskvich, which was celebrated as a sign of Russia’s auto industry’s resilience to Western sanctions. However, this rebirth also highlighted China’s growing influence in the Russian automotive sector. The new Moskvich models, unlike their boxy predecessors, featured engine parts and upholstery from China’s JAC Motors, indicating a significant partnership between the two countries.
Chinese carmakers are rapidly gaining market share in Russia, capitalizing on the departure of Western players following the Ukraine conflict. Imported Chinese cars now make up 49% of Russia’s market share, a considerable increase from just 7% in June 2021. Moreover, Chinese firms are increasingly involved in vehicle assembly at former Western factories, with six facilities now producing Chinese models or planning to do so.
This shift in Russia’s automotive landscape benefits the country by reviving idled factories and preserving employment opportunities for around 300,000 people in the sector. Chinese car exports to Russia have also become a lucrative business, with January-May 2023 figures showing a year-on-year increase of 5.2 times to nearly $3.6 billion. With Russia’s domestic production relying more on importing assembly kits from China, the yuan exchange rate now plays a critical role in determining profits and prices in the industry.
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