According to the data released by the European Business Association (AEB), in April, the sales of new cars in Russia fell 79% year-on-year to 32706, the largest year-on-year decline since AEB counted the sales of new cars in Russia in 2006. Russia sold 294000 cars in the first four months of this year, a year-on-year decrease of 43%.
According to a report from the Russian National University of economics, Russian automobile production is heavily dependent on imports, and more than half of the added value of the industry comes from abroad. Coupled with the zero inventory management mode adopted to improve efficiency, the impact of sanctions from western countries will soon appear in the Russian automobile industry.
The impact of the Russian Ukrainian conflict on the Russian car market has exceeded the impact of the epidemic sealing and control measures. Where is the Russian auto industry going?
Foreign capital retreated one after another
For the sharp decline in Russian car sales in the past two months, AEB explained that this was mainly because after the escalation of the conflict between Russia and Ukraine, the sanctions imposed by western countries on Russia caused many car companies to suspend their operations in Russia, which seriously affected Russian car production.
After the conflict between Russia and Ukraine began, most foreign-funded enterprises fled Russia one after another. According to a McKinsey Research Report, nearly 70% of the 281 Fortune 500 enterprises entering Russia have shrunk or withdrawn from the Russian market. Mainstream multinational car companies such as Volkswagen, Honda, Ford, BMW, Mercedes Benz, general motors and Volvo all announced the suspension of car exports to Russia. Many car companies with factories in Russia even announced the suspension of production.
Russia's automobile industry is relatively weak, and most of the automobile market share has long been divided up by foreign brands. Renault (including LADA, which is controlled by Renault), has a market share of nearly 30% in Russia, ranking first in the list; Followed by Korean cars, Kia and Hyundai have long occupied the second and third places in the sales list of Russian cars. Because of this, the collective action of foreign-funded enterprises has a great impact on the Russian car market.
In addition to the loss of production, there is a greater crisis hidden in the Russian automobile supply chain.
Russia's auto supply chain depends on imports. A report released by Shanghai Beidou Exhibition Co., Ltd. shows that Russia has only about 35% ~ 37% of auto parts For localized production, the market share of imported auto parts is as high as 63% ~ 65%. Taking 2019 as an example, the main importing countries of auto parts in Russia are Germany, Japan and China.
After the escalation of the conflict between Russia and Ukraine, many international auto parts giants announced the suspension of delivery to the Russian market, including Bosch, ZF, Haila, etc. In addition, some parts suppliers began to move their production lines out. Nokia, a Finnish tire manufacturer, said it had transferred key production lines from Russia to Finland and the United States.
"Russia's auto parts are facing great difficulties. 70% ~ 80% of Russian passenger cars still rely on imports. The inventory of Russian auto parts suppliers can only maintain production for 3 ~ 4 weeks." Russian auto industry analyst Sergey burgazliev told reporters.
At present, many auto enterprises have had to suspend the production of Russian factories due to the depletion of auto parts, including stellantis group, Toyota, Renault, Nissan, Hyundai, etc.
The decline in sales volume of foreign auto enterprises was significantly higher than that of local Russian auto enterprises. In April this year, the sales of LADA (Renault holding), Kia, Hyundai and Renault, the top four, decreased by 77.4%, 75.9%, 73.2% and 84% respectively year-on-year, while the local Russian car companies gaz and uaz, ranked fifth and sixth, decreased by 61.5% and 36.4% respectively year-on-year.
Since March this year, a number of chip design and manufacturing giants have announced sanctions against Russian semiconductors, Apple , Samsung, Intel and AMD have successively stopped their sales business in Russia. Qualcomm, one of the world's largest chip manufacturers, has also stopped providing chips to Russia, while arm has stopped providing products and support to Russian customers and partners.
For a long time, the Russian semiconductor industry has lacked the ability of independent supply. "Europe and the United States have mastered the core of chips, and the sanctions on Russian chips may have a great impact on the supply of automotive chips." The management of an independent auto enterprise in the Russian auto market told reporters.
Some Russian insiders said that there will be a serious shortage of chips in Russia. If Russian chip manufacturers choose to replace the processor architecture, it is expected to take at least 2 to 3 years, and the R & D expenditure will be as high as 1 billion rubles.
The collapsed market is unlikely to recover
The supply of spare parts is almost "cut off", foreign car enterprises withdraw from the market and consumption is weak. This year, the Russian car market may have the largest decline in nearly three decades. Previously, according to the prediction of Russia's largest dealer, the demand of the Russian auto market will fall by half this year, which is similar to the sales level of new cars in Spain, whose population is only one third of that of Russia.
In 2021, the sales of new cars in Russia increased by 4.3% year-on-year to 1.667 million, which means that the sales of new cars in Russia may fall below 840000 this year, while the annual sales of new cars in Russia have exceeded 1 million since the 21st century.
In the Russian automobile market, the fluctuation of production and sales volume is closely related to the economy and exchange rate. According to relevant statistics, the trend of Russian car market is almost consistent with that of its GDP.
The first wave of sales peak of the Russian auto market appeared in 2008. After the global financial crisis, Russian auto sales almost halved in 2009, and then the auto market slowly recovered. Four years later, in 2012, there was the second wave of sales peak in the Russian car market. In that year, the sales volume reached a record high of 2.94 million. Although there was a slight decline in 2013, the sales volume remained above 2.9 million. At that time, the Russian car market ranked second in Europe, second only to Germany.
However, after the Crimea incident in 2014, western countries began to take sanctions against Russia. According to CEIC data, in the two years before and after the Crimea incident, Russian car sales showed a year-on-year negative growth almost every month.
Since then, the Russian car market has never recovered. From 2015 to 2021, Russian car sales hovered between 1.4 million and 1.8 million, leaving only 50% or 60% of the peak period in history.
Since the Crimea incident, the Russian economy has not recovered to its previous level. Russia's per capita GDP reached an all-time high of nearly 16000 US dollars in 2013. In 2016, the figure was only about US $8700, almost halved. After years of recovery, the figure returned to US $12000 in 2021.
Analysts at VTB capital said demand was unlikely to recover due to falling real income, making the auto industry the most affected industry in Russia.
European car companies bear the brunt
The impact of sanctions by western countries on the business of multinational car companies in Russia is obvious.
The above-mentioned management of independent vehicle enterprises told reporters that after the Crimea incident, affected by the US sanctions against Russia, American vehicle enterprises have suffered a great impact in the Russian market. At present, they have basically retreated, Chevrolet has withdrawn from the Russian market, and Ford only retains the commercial vehicle business, which also leads to the poor performance of American vehicles in the Russian market in recent years.
In April this year, Ford was the only American brand among the top 20 sales in the Russian car market. In the first four months of this year, Ford sold 4423 vehicles, accounting for only 1.5% of the market.
After the escalation of the conflict between Russia and Ukraine, western countries have increased sanctions against Russia. Subsequently, Ford, the only remaining American auto company in the top 20 rankings, also played a "retreat drum". Ford recently announced that it would close two assembly plants and one engine plant in Russia and officially withdraw from the Russian passenger car market. In addition, Ford has also announced a suspension of commercial vehicle business until further notice.
During the conflict between Russia and Ukraine, European countries also continued to join the ranks of sanctions against Russia, and the most affected car companies were replaced by European car companies.
In April this year, the year-on-year decline of the sales volume of the top ten European auto enterprises in the sales list was greater than the overall level of the auto market. Among them, the year-on-year decline of Renault, Skoda and Volkswagen were 84%, 89.3% and 91.3% respectively.
Volkswagen Group said as early as early March that it would suspend production in Russian factories, and the recovery time was to be determined. At the same time, it would also stop automobile exports to the Russian market.
Compared with Volkswagen Group, Renault faces a dilemma. Before the outbreak of the conflict between Russia and Ukraine, Russia was Renault's second-largest market. Renault has invested at least billions of dollars in Russia, accounting for nearly 30% of the market in Russia. It is the European auto enterprise hardest hit this time. On May 9, Renault CEO Luca de MEO said that the company would decide the future of its business in Russia in the next few weeks, and negotiations were still ongoing.