European tire-1 suppliers have stopped supplying necessary parts to Russian OEMs. The Russian auto market is experiencing unprecedented challenges. Affected by the conflict between Russia and Ukraine, Renault group has officially announced its withdrawal from Russia. Previously, a number of European car companies have announced the suspension of operations, and it is not clear whether they will resume operations, which has led to a sharp decline in Russian car sales. At the same time, the supply of auto parts cannot be guaranteed.
People close to the Russian government told the first financial reporter that Volkswagen (including its Skoda and Audi brands) plans to announce the cessation of operations in Russia at the end of May this year.
"The Russian passenger car market is facing an unprecedented crisis. Renault, Volvo, BMW, Jaguar Land Rover, Volkswagen and many other carmakers have local production facilities in Russia, but most of them have stopped business, and Renault has officially withdrawn from the Russian market. This is a 100% political decision, not a business decision, because the Russian market is still favorable for most car brands Graphically. " Sergey burgazliev, a senior analyst in the Russian auto industry, told reporters.
Volkswagen may become the next Renault
Russia is the second largest market of Renault group (Renault brand and LADA) in the world. LADA largus and Renault duster are their most profitable products. Renault has imported this product into LADA's factory for production. Therefore, LADA duster, not Renault duste, is now launched in the Russian market. "Although Renault has withdrawn from the Russian market, I think Renault may try to continue to be a supplier of CKD kits for LADA X-ray and LADA Granta models." Sergey told reporters.
In addition to Renault, Nissan also officially stopped its automobile business in Russia. According to foreign media reports, Seiji Uchida, CEO of Nissan, said at the fiscal year meeting that it is expected that the Russian business will not be restarted in this fiscal year (April 2022 to March 2023). "At present, Nissan's Infiniti has not announced its withdrawal from the Russian market. They will keep it for one year. Almost all European auto brands have terminated their business in Russia and there is no sign of resumption of production." Sergey told reporters.
People close to the Russian government said that Volkswagen would announce the termination of its business in Russia at the end of May this year, "just like Renault, it will not resume operation." It should be noted that as of press time, Volkswagen has not confirmed this information.
According to the data released by the European Business Association (AEB), the sales volume of new cars in Russia in April was about 33000, down 79% year-on-year, the largest year-on-year decline since AEB counted the sales volume of new cars in Russia in 2006. In the first April of this year, Russia sold about 294000 cars, a year-on-year decrease of 43%.
The reporter learned that political factors lead to severe challenges for the Russian automobile industry, which also affects the import of parts required for automobile production. European automobile companies may terminate their business in the near future. At present, they still do not seek measures to replace imports. Previously, most European automobile enterprises did not introduce advanced production technologies and platforms into the Russian market, including electric vehicle technology.
There are two reasons for the decline of the Russian automobile market. One is that since the conflict between Russia and Ukraine, many European automobile brands have stopped production and export one after another. The other is that the level of automobile localization in Russia is very low. About 70 ~ 80% of the parts of passenger cars still depend on imports, and the parts can not be in place, which makes some main engine factories unable to carry out effective production. However, since Russian auto parts suppliers usually prepare inventory for 3-4 weeks, there is no significant decline in initial sales. However, with the passage of time, the difficulties faced by Russian automobile production have gradually increased. Due to exchange rate and logistics factors, the supply of some parts has been interrupted.
"The production and sales volume of auto parts manufacturers has decreased significantly. Many European auto brand tire-1 suppliers have stopped supplying necessary parts to the main engine plant, and the main engine plant of European auto brands has completely stopped production. For the Russian market, at present, only two manufacturers of passenger car brands maintain production and operation in Russia, including haver of Great Wall Motors and sollers group, a Russian carmaker Its uaz brand off-road vehicle. In addition, Geely is still producing, but Geely's production base is in Belarus. In addition to these enterprises, other automobile enterprises have stopped. " Sergey told reporters.
Where will the Russian auto industry go
Previously, due to political and other factors, the Russian car market has fluctuated in recent years. According to public data, in 2014, the sales volume of passenger cars in Russia reached 2.276 million, showing a cliff like decline in 2015, with sales volume reaching 1.284 million. It recovered in 2017 and 2018 (1.607 million), then decreased slightly in 2019, and further decreased to 1.434 million in 2020 affected by the epidemic. In 2021, the sales volume of Russian automobile market rebounded to 1.667 million.
"There has been a sharp decline in the market. If the situation continues to deteriorate, the sales volume of passenger cars is expected to reach 500000 ~ 550000 by the end of this year. If the situation starts to change in summer, the sales volume is expected to reach 750000 this year." Sergey told reporters.
An executive of a Chinese auto company told reporters that due to the weak industrial foundation, Russian local auto brands have not developed. Russia has not given sufficient support to its auto industry, missed the golden period of auto industry development, and the supporting system of auto parts has not developed. Russian auto parts, interiors and electronic components are mostly made in China, while many other parts rely on other countries. Due to the supporting supply of the Russian automobile industry chain, the development of the automobile industry has failed to move forward. On the other hand, the exchange rate has a great impact on the sales of automobile brands. European automobile brands and Chinese automobile brands will adjust their prices according to the fluctuation of exchange rate. "The exchange rate has been relatively stable recently." The executive told reporters.
With the withdrawal of Renault group, Russia plans to revive a Soviet era automobile brand. On May 16, Renault group announced that it would sell all its assets in Russia, sell 100% of its shares in Renault Russia to Moscow municipal government, and sell nearly 68% of its shares in AvtoVAZ to Russia's National Institute of Automotive Engineering (Nami). After Renault announced its withdrawal from the Russian auto market, Moscow mayor Sergei sobyanin announced that the factory left by Renault would be used to restart the discontinued former Soviet era auto brand muscovite.
In addition, komendant, a new model of AURUS, a local luxury brand in Russia, will be officially put into operation at the end of 2022. In 2018, AURUS kortezh launched by this brand became the executive car of the president of Russia and was personally endorsed by President Putin. Putin believes that the mass production of AURUS cars will strengthen the presence of Russian cars in the international market and will have the opportunity to increase the export of high-tech products.
"Some European car brands have factories in Russia and they are happy to sell their production facilities to any enterprise." Sergey told reporters that the Russian government welcomes new players from China, India and all others who want to enter the Russian market and replace European car brands. They can choose to buy local automobile factories in Russia at a very low price, or establish a joint venture in Russia, or sell automobile licenses to become CKD (full parts assembly) suppliers.
By the end of 2021, Russia has at least two mature enterprises for producing modern vehicles, which can be used to produce passenger cars and light commercial vehicles. However, for various reasons, the enterprises are in the state of bankruptcy protection. Stavropol automobile factory is one of them. It has been auctioned but no one cares. Considering that there were no buyers in the previous auction, Sergey suggested that the government establish a new automobile brand in Russia through low-cost acquisition. The automobile production platform can purchase the license right from Chinese automobile companies, carry out localized production of models after obtaining the license of Chinese companies, and preliminarily discuss the production of compact SUV, medium-sized SUV, sedan, pickup truck and light commercial vehicle. Sergey believes that this can increase 1500-2000 jobs and develop Russian auto parts suppliers. However, he said that Chinese enterprises may not be willing to sell the license of automobile production platform. At the same time, the formation of new brands takes time. In addition, a strong management team is needed, because the administrative efficiency of state-owned enterprises is not always efficient.
"In recent years, the product competitiveness of Chinese brands has been greatly improved, and the market share is also increasing." The above executives told reporters that it is not easy for Russia to re cultivate a state-owned brand, which is mainly due to the lack of core technology and R & D capacity, and there is no corresponding supporting system. However, he said that the situation in the Russian car market still needs to be observed. It is not clear at present. Some European brands have not made it clear whether they will restart their business in Russia.