Vladimir Putin plunged his country into economic turmoil when he illegally invaded Ukraine three years ago, with foreign sanctions, labour shortages and high interest rates dogging the state ever since. In the latest blow to the Kremlin, Russian car sales slumped by a quarter in the year to February 2025, ending a 22-month recovery streak, according to Reuters. A gap in the market left by Western manufacturers is now being filled by Chinese brands, which make up over half of Russia‘s car market, rising from under 10% before the Ukraine war.
The drop of passenger car sales by 24.9% year-on-year to February marks the first decline in monthly sales since April 2023, the Russian analytical agency Autostat said. The industry had been in gradual recovery over the previous 22-month period since the invasion in February 2022, which saw Western carmakers, including Volkswagen and Renault, pull out of Russia. Autostat expects the country’s car industry to plummet a further 10% or 20% in 2025 amid sustained and new high sanctions and rocketing interest rates. The Association of European Businesses also forecasts a 15% drop.
Russian crude oil prices also fell below $60 a barrel this month, marking a hit to a major source of revenue for the Kremlin and throwing the viability of the country’s military operations in Ukraine into doubt.
The conflict is estimated to be costing Russia more than £262 million each day, according to a report from Germany’s Stiftung Wissenschaft und Politik, and Putin has earmarked £117 billion for defence spending in 2025, a year-on-year rise of 25%.
The Kremlin may be counting on suspended hostilities with the US to re-establish international car markers in Russia and boost the sector after initial talks in Saudi Arabia floated the prospect of lifting some of the sanctions imposed by America following Russia‘s invasion.
Chinese brands currently dominate the car market in Russia, according to Autostat figures, with the exception of Russia‘s largest manufacturer Avtovaz, which was also down in sales by 14.3% in the year to February.
Before the invasion of Ukraine, Russia imported great quantities of auto parts from the West, with frozen supply chains following the outbreak of war posing complications for, and often halting domestic operations.
While the market has managed to bounce back from the initial disruption somewhat, Russia‘s reliance on help from China, including increased imports of Chinese vehicles, has resulted in a speedy sector dominance for President Xi Jinping‘s country. According to data from Gazprombank Autoleasing, Chinese cars amounted to 53% of the Russian market in the last year, a leap from a market share of just 9% in 2021.
Source link
