Global Automakers Withdraw from Russia... Chinese Cars Benefit

Stellantis and Volkswagen Halt Production and Withdraw Investment in Russian Plants
"Ukraine Invasion Could Worsen Situation Beyond Pandemic," Experts Warn
Chinese Automakers Increase Local Market Share, No Plans to Stop Production or Sales
Vacancies Left by Exiting European and Asian Brands Expected to Be Filled

Employees are working at Lada's complete vehicle assembly plant in Izhevsk, Russia. Lada is a brand of AvtoVAZ, which was acquired by the Renault Group, and it is the number one complete vehicle brand in local sales.

[Asia Economy Reporter Choi Dae-yeol] Stellantis, a leading European automaker, has decided to relocate the production of some vehicle models previously manufactured in Russia to other factories in Western Europe. According to foreign media including Automotive News on the 13th, Carlos Tavares, CEO of Stellantis, recently stated, "We are not considering new investments in Russia."

According to reports, the company operates a factory in the Kaluga region southwest of Moscow, producing commercial vans in collaboration with Mitsubishi. Until early this year, the plan was to expand this factory and make it a production hub for vans in Western Europe, where demand is high. The idea was to manufacture vans for major affiliated brands such as Peugeot, Opel, and Citro?n and supply them across Europe. The demand for vans had surged within Europe due to the activation of courier and delivery services amid the COVID-19 pandemic.

The decision to move the production base was due to the difficult local production conditions caused by Russia's invasion of Ukraine. The logistics system, including land and sea transport, was virtually paralyzed, making it impossible to procure parts on time or assemble and transport finished vehicles smoothly. Stellantis is reported to have decided to shift the factory's production volume to plants in France and the United Kingdom.

Carlos Tavares, CEO of Stellantis

Following Russia's invasion, major European automakers have been steadily cutting ties. Not only have factories in Russia been affected, but the supply of parts from Russia and Ukraine has been disrupted, impacting operations at other European plants. Volkswagen halted production at its Polish plant, and ?koda stopped production at its Czech plant. Hyundai, considered a leading local manufacturer, also stopped its factory this month and has yet to determine when to resume operations.

Some high-end brands such as Porsche, Bentley, and Ferrari, as well as certain Japanese brands including Honda, Nissan, and Suzuki, have either suspended or decided to cease local sales. Herbert Diess, CEO of Volkswagen Group, remarked, "The Ukraine invasion could have a greater impact on the European economy than the COVID-19 pandemic over the past two years." This is because it exacerbates cost increases and energy shortages, raising the likelihood of inflation.

In June 2019, executives of Chinese automaker Chancheng Motors posed for a commemorative photo at the complete vehicle factory they built in the Tula region of Russia. This was the first time a Chinese automaker established a full production facility overseas, outside of China.

Despite the worsening situation, there are forecasts that Chinese brands may benefit from the current crisis. Unlike brands from North America, Europe, and other parts of Asia, Chinese automakers have not shown signs of halting local production or sales. Within China, brands such as Haval, an SUV and pickup truck brand under Changcheng Automobile, as well as state-owned Chery Automobile and the largest private automaker Geely, have recently increased production or sales in Russia.

Chinese brands have rapidly increased their market share in Russia over the past two to three years. According to Autostat, local sales of Haval and Geely were approximately 17,000 and 15,000 units respectively in 2020. Chery also slightly exceeded 10,000 units. Although their sales rankings were only in the late top 10, Chinese brands dominated the top 1 to 5 spots in terms of year-over-year growth rates. Sales increased by at least 40% and in some cases by more than 150%.

According to the European Business Association, last month Haval and Chery jumped to 10th and 11th place in Russia's sales rankings. Geely also rose several places to 13th. Eunice Lee, an automotive analyst at Bernstein Bank, said, "If U.S. and European sanctions on Russia are prolonged and automakers are effectively banned from operating in Russia, Chinese automakers could secure the local market."

Russia February Passenger Car and Light Commercial Vehicle Sales Rankings by Brand. While overall sales volume decreased by about 5%, Chinese brands such as Haval, Chery, and Geely saw sales increase by double digits.

This content was produced with the assistance of AI translation services.