After President Putin’s remarks calling for closer monitoring of car prices, a formal presidential order appeared on the Kremlin’s site. The directive tasks the government with concrete steps to improve car accessibility for Russian citizens and to track pricing to curb unreasonable increases.
The document outlines specific instructions for the Government of the Russian Federation:
a) adopt measures that increase the availability of cars for citizens by establishing a quarterly target indicator showing the growth in accessibility for 2023 compared with 2022;
b) ensure ongoing monitoring of motor vehicle prices to prevent excessive increases. Reports should be prepared by April 15, 2023 and then every quarter thereafter.
What does this mean in practice?
The government is expected to implement a mechanism to regulate or at least scrutinize prices on a quarterly basis. Rosstat already tracks consumer price indices using a defined methodology. There is a distinction between new domestic cars, new foreign cars assembled in Russia, and used foreign cars, with each category monitored separately.
Price monitoring represents the initial step. The order hints at using a specific index or average price as a reference point to set a price corridor or a ceiling price.
One scenario could set 2023 price growth to align with 2022 inflation, or perhaps keep increases to zero in 2023. A more aggressive approach might aim for new cars to be 10 percent cheaper. It is impractical to set a single average price for all vehicles. The next question becomes whether price controls will target particular makes and models. How would a completely new model be evaluated, and how would changes in the ruble exchange rate be managed?
Which prices count?
The order points to several price moments that could be considered:
- producer sale prices, which are clear and visible;
- dealer price lists, which are largely transparent;
- actual prices under purchase agreements, including the cost of optional equipment, which can be verified if needed.
Both approaches have advantages and drawbacks. If manufacturers are barred from raising sale prices, salaries and raw material costs could still push costs higher. Prohibiting dealers from charging above price lists may lead to shortages or gray-market activity. Limiting dealer margins has shown some effectiveness when resale price caps existed.
What drives more supply?
In broad terms, the main lever is market saturation. When more cars enter the market, prices tend to ease. Shortages can persist, echoing past periods when a used car cost more than a new one because the latter’s price was set by the state.
Forecast for 2023
- AVTOVAZ revised its December production plan, moving from 500,000 units to about 401,000.
- Chinese brands are not expected to contribute more than roughly 200,000 cars.
- About 50,000 units from Moskvich were anticipated.
- There were signs of gradual evolution, but large volumes were not expected yet.
- Imports via parallel channels could reach up to 100,000 units, though most would be private imports.
Overall, about 750,000 new cars could be produced in the period. In 2021, the market saw about 1.68 million cars sold.
What about future plants?
There was hope for the Nissan plant in St. Petersburg, previously controlled by AVTOVAZ. A deputy prime minister noted that the venture would begin in 2023. Two paths were envisioned: a foreign company could assemble cars locally under a joint arrangement, or an agreement could allow a foreign-made car to be released under a Russian label with gradual localization. This could include class C and D sedans or mid-size crossovers similar to the Qashqai and X-Trail, with a Russian brand and emblem, but potentially using foreign-sourced components.
Even then, a modern crossover produced with Chinese parts, assembled at the Russian plant, would not be inexpensive—likely around two million rubles even with subsidies. Still, the aim was to achieve affordability.
There was also a desire for lower prices, as is common in such discussions.
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