Western car brands returning to Russia: myth or reality?
The Chinese got the Russian car market as a prize, but will they be able to keep it if Western brands return to the country?
Since February 2022, the domestic car market has undergone a major transformation. Now it has been captured by new brands from China. However, this year the situation on the world stage began to change, and experts began talking about the return of once-popular car brands to Russia. Who can be one of the first to return and how difficult this process will be, how the balance of power in the market will change and whether this will affect prices — read in the material of the analytical service of Realnoe Vremya.
The situation on the world stage is still so vague that it is completely premature to draw far-reaching conclusions about such a long-running market as automotive one, says Alexander Klimnov, an expert at Autostat Info. “What do we have today? The US-Russian negotiations have just begun, which, on the one hand, is already progress, but on the other, the majority of NATO countries are in favour of continuing to support Ukraine, which does not want peace, and Donald Trump, for all his statements for peace between Russia and Ukraine, extended anti-Russian sanctions for another year," he said.
Against this background, the arguments about the return of foreign brands that left Russia objectively look like only background noise, that is, rumours, the expert notes.
The expert specified that the range of car sales in the Russian market ranges from 1 to 1.6 million units, and the peak value reached in the early 2010s was about 3 million vehicles (including trucks). This makes the domestic market at the same time one of the largest national markets (from 2nd to 5th place in Europe and from 7th to 8th to 18th to 20th place in the world). “At the same time, because of the sanctions, the Russian market has become quite toxic for Western countries. Nevertheless, automakers that have suffered very large losses after 2022 do not let it out of their sight, including due to the phenomenon of replacing Western (and Asian) brands with Chinese ones," the speaker noted.
The potential for the repurchase of production facilities by departed car brands has already been the subject of discussion in the media, which indicates a certain importance of this process for some domestic motorists and businesses, the expert reflects.
Approximately 60% of the market over the past 2.5 years has been occupied by the Chinese, and another 30% by domestic brands that do not satisfy consumers with the price-quality ratio and “durability”, as representatives of the taxi and carsharing businesses alarmingly broadcast, predicting a serious crisis in their segments due to lobbying for a ban on the use of non-localised foreign cars. And another 10% of the market is replenished with foreign cars from unfriendly countries, despite skyrocketing prices (about 5.5 times). This is how Klimkin described the balance of power in the market.
“At the same time, the secondary market of Chinese brands in our country is still being formed, and although their share is increasing due to their success in the primary market, they are still far from leading in resale, but the very specifics of the Chinese automotive industry, which has achieved twice the rate of model change, and therefore a lower age of resale, pushes accelerated sales development trade-in and other schemes," the expert believes.
While there will be no real lifting of anti-Russian sanctions and a reverse negotiation process on the return or redemption of actually confiscated assets, and this process may take years, real plans to relaunch brands from currently unfriendly countries can only be discussed hypothetically, the source said. At the same time, practical steps, primarily on the part of Russian agencies in the direction of specifying the conditions for the return of manufacturers, may still follow. But so far, it is more likely in the field of tightening the conditions of return, although experts are talking about possible compromises, he added.
“Due to external circumstances, the Chinese got our market as a prize, that is, without fierce competition, which involves developing a dealer and service network in all areas and fine-tuning models to market-demanded indicators, as well as deploying local assembly," Klimnov recalls. “Our dealers complained at various conferences and forums at the end of last year and the beginning of this year that Chinese manufacturers behave harshly in most cases, do not provide a dealer network, neither proper financial nor organisational support, that is, they behave like visitors not always, but only for a while. They were already broadcasting the opinion that if consumers had a more or less realistic opportunity to return to a number of segments (primarily budget B+ sedans and premium brands), then the influence and presence of the Chinese could deflate like a balloon. Both consumers and dealers will race after the usual Solaris, Rio and BMW with Mercedes. This option then sounded like a purely hypothetical one, but now it is being discussed almost seriously.
With the widespread and unlimited return of previously popular brands of foreign cars to the Russian market, a significant part of consumers, including corporate ones (for example, taxi companies), would like to switch back, the expert reflects, however, the general state of the economy and the financial sector: high inflation and a high Central Bank rate, projecting an increase in the cost of loans and leasing, as well as outstripping rising prices for new cars will undoubtedly limit such aspirations.
During the boom years from the end of 2022 to the beginning of 2025, Chinese brands occupied over 3/5 (and over 4/5 in the crossover segment) of the Russian market. At the same time, the increase in their presence was accompanied by a multiple increase in prices compared to pre-war times.
It will not be easy for foreign cars from unfriendly countries to return to the previous market parameters precisely due to rising prices and reduced effective demand, he believes. In addition, the Russian authorities can quite reasonably (and most likely will) make it an indispensable condition for the localisation of foreign cars for manufacturers to participate in special investment contracts, and certainly in the form of joint ventures with Russian manufacturers, and this, of course, will complicate and increase the cost of a possible return, the analyst does not exclude.
“Korean Hyundai and Kia may return to the Russian market first of all, as their positions were the strongest before leaving," Klimnov believes. “Moreover, the previously quite popular Korean brand SsangYong, which became KGM after bankruptcy and rebranding, is returning to Russia, despite possible sanctions. Renault, Peugeot (as part of Stellantis), Volkswagen, as well as Japanese Toyota and Nissan-Mutsubi can try to return. In any case, there is a subject for discussion here, if, of course, the global situation is favourable for this," he listed.
Operationally, for the coming year, there is no doubt that the oversaturated Chinese market will force Western brands, if not to reduce prices directly, then to be more attentive to the needs of both dealers and consumers, that is, to switch to a policy of flexible discounts, which, however, can only slow down the rise in car prices and falling sales.
“In any case, even rumours about the return of European, Korean and Japanese brands are useful for consumers in terms of reducing price demands from Chinese brands close to the monopoly," Alexander Klimnov believes.
The lifting of external restrictions will not be the only condition for the return of foreign automakers. It will also depend on the conditions that will be put forward by Russia to foreign companies, what will be offered to them. It will also depend on the companies' counter-offers and their requirements. “Foreign car manufacturers can also put forward their own conditions and demand compensation for that they have been absent from the Russian market for several years. All this will only confirm that the return process will be lengthy, and the parties will need to find a compromise and reach agreement with each other on many issues," he believes. “It is possible that some companies may refuse to return to Russia, so in a few years the domestic car market will look different than before.”
“Chinese automakers will remain in the Russian market and will be a part of it, firstly, because foreign automakers should not be expected to return to Russia quickly, and consumers will not immediately return to cars of the previous brands, they still need to be brought to the country, issued, and put on the market, and this takes time," the analyst explains. “Secondly, over the past few years, Chinese cars have gained a foothold here, users have recognised them and got used to them, so demand for them will remain.”
Those Chinese cars that have been operating in Russia for a long time, have established permanent supplies of their products here, and have created a sales and service network in the country will be in demand from domestic consumers, he believes. Those Chinese automakers that have production facilities here will also be in demand, but this is not a prerequisite for their preservation among the best-selling Chinese cars in Russia.
“Unfortunately for consumers, car prices will continue to rise in 2025, due to inflation and the rising cost of goods and services used by participants in this segment in their activities. It will also be influenced by the economic situation, changes in exchange rates and measures to regulate it. It is possible to reduce car prices in 2025, but automakers and dealers will do this only for low-demand models, and the validity period of such promotions will be limited," Baranov concluded.
