20-7-2023 (MOSCOW) The recent relaunch of the classic Soviet-era car, the Moskvich, by a state-owned company in Moscow was hailed as a historic event showcasing the resilience of Russia’s auto industry amid Western sanctions. However, beneath the surface, this revival also highlights China’s increasing influence in a crucial sector of the Russian economy.
The new Moskvich models rolling out of the Moscow Automobile Factory Moskvich bear little resemblance to their boxy Soviet-era counterparts. Instead, they feature sleek four-door SUVs with engine parts and upholstery supplied by China’s JAC Motors. Unofficial sources revealed that the Moskvich 3 model is, in fact, a JAC Sehol X4 assembled in Moscow using Chinese kits.
Although the Moskvich company acknowledged its collaboration with a “foreign partner,” it did not confirm ties to JAC. Nonetheless, the influence of Chinese carmakers on Russia’s auto market has been evident. Imported Chinese cars now make up 49% of Russia’s market, a significant increase from 7% before the Ukraine war. Chinese exports of passenger cars to Russia have also surged, reaching nearly $3.6 billion in the first five months of 2023.
China’s expanding presence in the Russian auto industry extends beyond exports. Chinese firms are capitalizing on the departure of Western players by increasing sales through vehicle assembly at former European, Japanese, and U.S. carmaker factories. Six such factories in Russia are now producing Chinese models or have plans to do so, with an annual capacity of approximately 600,000 cars.
The growth of Chinese carmakers in Russia has brought both benefits and challenges. While it provides Russia with opportunities to restart production at idled factories and employ more people, there are concerns about the dependence on importing assembly kits from China, which leaves profits susceptible to fluctuations in the yuan exchange rate.
China’s sway over Russia’s auto industry signals a profound shift in the market dynamics, with Western players being replaced by Chinese counterparts. As China’s influence continues to grow, it remains to be seen how the Russian auto industry will navigate this new landscape and whether it can strike a balance between foreign influence and preserving its domestic interests.
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