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Russian car sales have collapsed since the invasion of Ukraine

By Anna Cooban, CNN Business

Auto sales in Russia plummeted by almost two-thirds in March, as the war in Ukraine, Western sanctions and an exodus of foreign businesses wreaked havoc on the country’s economy.

Just 55,000 new cars and light commercial vehicles were sold in Russia last month, down 63% from March 2021, according to data released Wednesday by the Association of European Business (AEB), a group representing foreign investors in Russia.

All brands — European, American and Asian — suffered losses, but the hardest hit among the big sellers were Volkswagen, whose sales fell by 74%, followed by the German group’s Å koda brand and Toyota. In February, overall sales fell just 4.8%, association data showed.

Lexus, Toyota’s luxury brand, also took a severe hit: Sales collapsed 91%, the most of any make. Porsche, also part of the Volkswagen group, saw its sales slump by 73%.

Western carmakers ran for the exit following Russian President Vladimir Putin’s decision to invade Ukraine in February. Toyota and Volkswagen were among a raft of companies to announce last month that they had stopped production and halted exports to the country.

France’s Renault, which owns Russian carmaker AvtoVAZ, recently said it was suspending all activities at its Moscow factory, and “assessing the available options” regarding its stake in the company.

The collapse of the ruble also pushed the average price of a new car in Russia up by between 35% and 45% in March, according to Russian car market analytics website Autostat.

But splashing out on a new car will likely fall low on most Russians’ list of priorities. Since the invasion, annual inflation in Russia has surged to nearly 16%, Reuters reported. The price of staple goods, including sugar and tomatoes has shot up, and there have been reports of shortages in supermarkets after a spate of panic buying.

An opening for China?

Domestic car models like the AvtoVAZ-owned Lada — an icon of Soviet-era self-reliance — could, in theory, stand to benefit from the absence of foreign competition. But sanctions have snarled supply chains, leading to a severe parts shortage.

The company has brought forward a company-wide summer vacation to April, and announced it will move to a 4-day week for three months from June to try to save the jobs of more than 40,000 employees. The company says it is also designing new versions of several Lada models to be less reliant on imported parts.

Chinese carmakers could capitalize on the departure of Western brands, said Carol Thomas, central and eastern European analyst at consultancy LMC Automotive.

“Chinese brands will no doubt see the current situation as an opportunity and there is a chance more will look to establish a Russian production base in the future,” she said.

China’s Great Wall Motors and Geely saw strong growth in sales in Russia over the first quarter as a whole, and suffered narrower losses than Western rivals in March.

— Clare Sebastian and Chris Liakos contributed to this report.

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