China boosts Russia's car production

AVTOVAZ and Chinese car-makers have boosted their share of the Russian new car market as other manufacturers exit.

According to a report published by Automotive News China this week, Russia’s largest automotive manufacturer increased its share of the domestic market last month (August) despite failing to overcome a decline in annual sales.

Chinese importers also took advantage of the situation as western companies continue their exodus of Russia.

Almost all car manufacturers operating in Russia ceased production in the country after President Vladimir Putin invaded Ukraine earlier this year. Imposed sanctions put a dent in the supply of parts to Russia, but not long enough to serve any lasting effect.

AvtoVAZ, which resumed production in June, boosted market share of its Lada brand to 43.4 per cent last month from just 17.5 per cent a year earlier with 18,087 units sold. 

August new passenger car and light commercial vehicle sales in Russia declined by 62 per cent against the same month last year, compared with a decline of 75 per cent in July, according to data sourced by the Association of European Business.

Month-on-month, sales fell by almost 29 per cent to 41,698 units.

China’s Great Wall Motors (GWM) upped sales of its Haval brand by 26 per cent in Russia and increased its overall market share to 7.5 per cent versus 2.1 per cent in the previous year. Geely Automobile Holdings sales declined by 8.1 per cent, its share increased to 4.8 per cent.

The news comes several months after Renault transferred its 68 per cent stake in AvtoVAZ to the Russian science institute for the symbolic price of one rouble ($A0.019).

Russian companies have been purchasing Western companies at bargain prices since its invasion of Ukraine in February, the Russian trade ministry saying Renault’s Moscow factory, which produces Renault and Nissan models, would also be passed to the city’s government.

According to a report published in Automotive News Europe in April, Renault, and the French government – which owns a 15 per cent stake in Renault – both declined to comment on the deal, which was first reported by Russian news agencies citing the country’s trade minister, Denis Manturov.

Mr Manturov said Renault “decided to transfer its stake in AvtoVAZ”, which owns the Lada brand, to the NAMI (Russia’s central research and development automobile and engine institute) “because it lacked the ability to keep its Russian operations going”.

According to the Russian trade minister, Renault would have the right to buy back its stake in AvtoVAZ within five years but suggested it would cost the company considerably more than one rouble.

“If during this period we make investments, then that will be considered when it comes to the cost. There won’t be any presents here,” said Mr Manturov.

Until recently, Renault had built three models based on the Dacia Duster platform at its Moscow plant, while AvtoVAZ builds Ladas, Russia’s top-selling brand with approximately 22 per cent of the market (based on April figures).

The French company received about 10 per cent of its revenue from Russia last year and said last month it was considering a €2.2 billion ($A3.26b) non-cash write-down to reflect the potential costs of suspending operations in Russia.

Renault first acquired a 25 per cent share in AvtoVAZ back in 2008 at a cost of more than $US1 billion ($A1.41b) and gradually increased its stake, consolidating the company into its balance sheet in 2017.

It has invested significantly in modernising both the production plant, in the city of Togliatti, and in updating Lada’s antiquated model range.