The economy relies heavily on imports. Across the board, the car industry depends on externally sourced components for assembly plants, including native manufacturers such as AVTOVAZ and UAZ. Complete car kits arrive from abroad, with many assembled using the SKD method. Finished cars are also imported, though they represent a minority share of total sales, not exceeding 15 percent.
Critical parts like airbags, ESP systems, automatic transmissions, CVTs, and turbocharged engines are not produced domestically. Even electronic components, including microchips, are not manufactured here, even though the underlying technology for their production has long been studied and understood.
What changed?
Because the country has a strong import reliance, car manufacturers faced significant parts shortages over the past year, a challenge shared by factories worldwide. The global automotive supply chain is a complex network of logistics and interconnections. It is impractical to perform every task within a single nation when global supply and demand are interconnected. If the geopolitical environment had remained stable, factories such as Renault Moscow, Hyundai St. Petersburg, AVTOVAZ in Tolyatti and Izhevsk, and others would have still faced component shortages and shutdowns in early March.
The evolving world situation has worsened these issues. Even after finding a component supplier, payment remains a hurdle if foreign trade activity has slowed to a crawl. Delivering parts, car kits, and finished vehicles becomes even harder when transport corridors are disrupted or slow to recover.
At the start of March, only cars that had already been contracted and produced from existing component inventories could be delivered. New shipments to dealers effectively halted as the market awaited clarification. The currency situation also mattered, as investors and buyers waited to see where the ruble would stabilize to provide some predictability.
Conveyor lines run in nearly every plant, but there is no dramatic departure to mark a new era. It is not as if Russia has vanished from the industrial map. Even Volvo, which initially announced a withdrawal of some activities in Russia, soon revisited that position and reconsidered its plans.
We are the market
Russia may not be the defining market for any single automaker, yet it remains important and highly attractive for many brands. For Skoda, Russia ranks as a second-largest market after China. It holds substantial importance for Korean manufacturers and for the Volkswagen Group, Renault Group, which AVTOVAZ is part of, and several other brands. Rolls-Royce, for example, recorded a high sales figure in 2021 within Russia, illustrating the market’s potential reach.
Most brands are likely to return to Russia once relations between major economies thaw. Those with their own production facilities will lead the way. Large investments—often hundreds of millions of dollars, and in some cases billions—are involved. These are not mere factories; they are integral parts of the global auto industry, with headquarters, staff, and supply chains that would be affected by a continued halt in production.
So, a return is anticipated. Not immediately for every brand and not all at once, but a return is expected.
And China?
Chinese manufacturers can step in to address shortages, but even their industry faces limits. It is not feasible to drastically increase supply overnight or tailor new models for the Russian market on short notice, nor is certification a rapid process. The question also remains whether Chinese brands can replace established premium and luxury players like Mercedes, BMW, and Renaults at speed. Rolls-Royce stands as a case in point for premium demand.
It is important to note that when a market experiences a shortage, price recovery tends to be swift. A crossover that cost roughly 1.5 million rubles yesterday could fetch 2.5 million rubles or more in a tight market. Such price dynamics will persist as long as demand outpaces supply.
When?
If relations between Russia and major trading partners move toward normalisation by the spring, a relative stabilization of the car market could begin in early 2023. Prices for January inventories may not revert, but speculative offers such as inflated prices for certain models are unlikely to persist once clarity returns.
Should the confrontation continue, market alignment will take longer. A period of pent-up demand may unfold, yet the market size remains substantial given Russia’s population and vehicle usage. A realistic baseline is around 1.5 million new cars annually, and purchases not yet made will be addressed later in time.
- Dealership opportunities still exist with strong discounts available
- The TM Za Rulem consumables range continues to expand, with ongoing quality assessments
- Car insights and reviews can be found on video platforms