 "Russians switch to used cars as Western sanctions hit domestic auto sector hard")
Moscow: With the Russian auto industry feeling the full impact of Western sanctions over the conflict in Ukraine, Russians have been compelled to move to used cars as production nosedived and prices soared.
Across Russia, consumer spending on new cars more than halved last year in 2022, as the domestic automobile industry reeled under the economic sanctions slapped on the country by Western nations.
Though it is still unclear how much the economic curbs on Russia have had an impact on the country, it is a fact that potential Russian buyers are switching to either cheaper models or used second-hand cars.
But, the Russian auto industry, which was heavily reliant on foreign manufacturers and imported parts, has been hit hard.
Spending on new cars dipped 52% to 1.5 trillion roubles ($20.4 billion) last year, while the number of new cars sold dropped by 58.8%. Car production also slumped to its lowest since the 1991 collapse of the Soviet Union as Western automakers halted production and sold factories.
The total spending on new and used passenger cars dropped over 15% in 2022, as inflation pushed up prices and drove living standards down, data from analytical agency Autostat shows, despite a 14% rise in spending on used cars.
That left used cars accounting for almost three quarters of all cars sold, up from 55% in 2021, the data shows.
“Money flowed into the used cars market as prices for second-hand cars held up, while at the same time the structure of the new cars market changed significantly,” Autostat CEO Sergei Udalov said.
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View All“Budget Ladas and Chinese cars with prices of nearly 2 million roubles and more remain in the reckoning, while premium brands have been completely left high and dry,” he said.
Last year, annual inflation at 11.9% contributed to an estimated 1% drop in Russians’ real disposable incomes, according to the Rosstat statistics agency.
Retailers have invested heavily in discount store formats, a trend that is being mirrored in the automotive sector.
Anton, an employee at a major Russian company who declined to give his last name, purchased a used Skoda in December, preferring a Western-made car to a domestic or Chinese-made alternative. At 2.5 million roubles, his Skoda was around 1 million roubles more expensive than it would have been a year earlier, but still 1 million roubles cheaper than a brand new version.
Anton said he felt lucky to have snapped up a used foreign-made car with low mileage, as stocks are running low.
Czech carmaker Skoda Auto, a unit of Volkswagen (VOWG_p.DE), said deliveries to Russia fell almost 80% in 2022. Volkswagen has closed its Russian factories and stopped imports, but has not yet agreed to a sale like some of its peers.
France’s Renault (RENA.PA) sold its majority stake in Russia’s Avtovaz to the Russian state for reportedly just one rouble, but with a six-year option to buy it back. The same state buyer then snapped up Nissan’s (7201.T) assets for one euro.
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