10.03.2022 / What is expecting russian car market

Essential questions affect all car market participants:  how will new car market size look like, which car brands will still be present on the Russian market, how will the prices change, how will the customers behave?

In 2021, there were 1 511 thousand new cars sold (except LCV), 114 of them (7,5%) are Chinese brands. Increase of Chinese vehicles sales showed record-breaking 104% in 2021, as well all global car market grew only by 4%. The majority of Chinese cars sold in Russia belong to imported ones.

Chinese manufacturers do not suffer from components (e.g., semiconductors) lack, for this reason Chinese vehicles did not show any shortage in 2021.

In the current year European, American, Japanese car manufacturers will face semiconductors and other components shortage because of stopped supplies of neon produced with Russian and Ukrainian participation, stopped supplies of other gases, rare-earth metals, subcomponents from Russia or Ukraine. E.g., Volkswagen group was forced to stop manufacturing on European plants because of cancelled electric cables supplies from Ukraine.

China is autonomously manufacturing significant amount of components and has reliable supply chain of raw materials necessary for component base manufacturing. Therefore, Chinese manufacturers will be able to increase car supplies to the Russian market.

Russian brands (Lada, UAZ) occupied only 23,3% of the market share in 2021. Totally, there was 351,8 thousand new Russian cars sold (except LCV). Russian brands sales increase showed only 5%. Despite Russian cars` high localization level, domestic manufacturers directly depend on foreign supplies of components and materials. E.g., AutoVAZ declared about manufacturing suspends for various days because of delays in component supplies. Besides that, ruble course decrease leads growth of imported components and materials value that provokes regular price increase of Russian vehicles traditionally belonging to budget segment. Such price increase can be critical for customers taking into account a significant credit rate growth.

Foreign non-Chinese cars occupied 69,2% of the new car market in 2021, their sales showed 1 045,2 thousand.

Nowadays several foreign car manufacturers suspend their activity in Russia because of sanctions and gaps in supply chains.

Last year, Korean brands occupied 23,7% of the market, there was 357,8 thousand Korean vehicles sold, what overcame Russian manufacturers. In the current year, Korean manufacturers declared that sanctions shall not affect car production and supplies. However, it is not clear yet, if there will not be any delays of components for Russian manufacturing plants or Korean cars imported into Russia.

Despite that, removal of cars from sanctioned production list, opening in 2022 of neon manufacturing plant in Korea, which is necessary for semiconductors production, can lead to Korean cars` success on the Russian market in the current year. In premium-segment, the share of GENESIS can extend because of problems with supplies of European and Japanese vehicles.

It is possible, that several Japanese manufacturers will be able to continue working in Russia. There share occupied 15,7% of the market in 2021, only car sales result showed 237,9 thousand. Japanese cars sales slightly decreased in 2021 (5%) in comparison with 2020 because of parts supplies problems and the leave of DATSUN.

European cars occupied 28,3% of the market in 2021, there was 426,9 thousand cars sold, the sales decreased by 3%.

If the supplies of European and Japanese brands significantly reduce in the current year, their position in the mass segment will be occupied by Russian, Chinese and Korean brands. However, the biggest domestic manufacturer AutoVAZ also can decrease the production volume in 2022 because of spare parts shortage. AutoVAZ was already forced to suspend manufacturing on the 5,9,10,11 of March. Supplier replacement is not a rapid process, approval of new supplier minimally takes a year.

Car market is expected to face following problems in the current year:

- stop of manufacturing and supply of several brands for political reasons
- suspends of car supplies to Russia due to logistic problems
- suspends of car manufacturing because of component shortage
- rapid new car price increase
- used car price increase
- several owners would not want to sell their used cars in absence of replacement. So, in January 2022 used car sales decreased by 8,1% in Russia in comparison with January 2022.
- auto credits rate growth. After the key rate has increased up to 20%, restrictions of credit limit value were cancelled, credit average rates grew up to 25-30%.
- automotive leasing rate growth
- problems with genuine spare parts supplies of European and Japanese countries due to sanctions and logistic complications
- significant growth of genuine and non-genuine spare parts prices
- significant growth of standard-hour cost by official dealers, customers leak to non-official ones
- insurance problems connected with spare part shortage, spare parts and reparation works price increase.

There are following key questions which determine car market volume in 2022:

- how long will the dollar course fix on the level 100 RUR/$?
- how intensively will the unemployment grow due to closure or reduce of business and manufacturing?
- what will pass to population contributions?
- how much will households incomes decrease?

In critical situation, the car market can reduce up to 900 thousand – 1 million new cars in 2022, the most significant part of which will be represented by Russian, Chinese, Korean brands.

Tatyana Arabadzhi,
NAPI/Russian Automotive Market Research
Director

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