Russians reluctantly embrace Chinese cars after Western brands depart By Reuters

By Gleb Stolyarov and Roman Churikov

MOSCOW (Reuters) – As the exodus of Western carmakers narrows options for Russian consumers, Chinese automakers are filling the gap, forcing Russians to overcome their reluctance to embrace Chinese brands and stomach higher prices.

Chinese brands such as Haval, Chery and Geely now account for almost 40% of Russia’s new car sales, data from analytical agency Autostat and consulting company PPK showed, up from less than 10% in January-February of 2022, pouncing on the opportunity left by the exit of firms such as Renault (EPA:), Nissan (OTC:) and Mercedes.

But there are teething problems. Reuters spoke to several Russian car buyers – individuals and dealerships – who perceived the quality of some Chinese cars to be lower than Western rivals and industry experts said Chinese manufacturers needed to enhance their reputation even as their market share soars.

Stepan, 28, who has increasingly driven Chinese cars when using carsharing services, is among those that need convincing. Among his complaints was the smoothness of the drive.

“I managed to buy a Skoda in 2022. If you want my honest opinion, the difference (with Chinese cars) is massive,” he told Reuters at Moscow’s Favorit Motors dealership.

Czech carmaker Skoda Auto, part of Volkswagen (ETR:) Group and one of several Western automakers that had local car production, is in the final stages of a deal to sell its Russian assets in the wake of Western sanctions after Moscow despatched troops to Ukraine last February.

When buying his new Chinese car, Alexander, 74, looked for one which encompassed Swedish technology.

“I believe that in time the reliability will improve,” he said. “For example, I know that (Geely) Tugella has a Volvo engine. This sold this car for me.”

Russia’s former president Dmitry Medvedev said on Friday after a visit to China in December that cooperation with Chinese manufacturers was good and consumers’ perceptions were out of date.

“We used to laugh at some of their designs, but I went for a ride in a local car and looked at others,” he said. “I’ll say bluntly: the car I drove was certainly no worse than a Mercedes.”

COMPETITION DRIES UP

Most Western automakers, who have fought with domestic carmakers for market share since they began building factories in Russia in the early 2000s, ceased operations last spring.

“We’ve lived our whole lives focused on European, Japanese, American brands and did not especially take the Chinese market into account, which…has developed at an incredible rate,” said Vladimir Shestak, general director of Altair-Auto in Vladivostok, whose dealership specialises in the Mercedes-Benz and Geely brands.

Though the majority of foreign firms have exited Russia or are in the process of leaving, lingering stocks and parallel imports mean some companies’ cars remain on sale for now.

Domestic producer Avtovaz’s Lada brand is Russia’s most popular. Renault, through its former controlling stake in Avtovaz, had the highest market share among foreign producers before Russia began what it calls its “special military operation” in Ukraine.

While Chinese cars are increasingly filling the gap, the lack of reputation remains an issue, said auto industry expert Sergey Aslanyan.

“Yes, they have almost no competitors here anymore,” he said. “But that does not mean that people will change their opinion quickly.”

Chinese brands’ market share reached 37.15% in January-February, up from 9.48% a year earlier, Autostat and PPK data showed. Sales of departing European, Japanese and Korean brands were down to 22.6% from 70%.

The sharp swing comes, however, amid plummeting sales of new cars, which slumped 58.8% in 2022 as lower living standards and a desire for Western-made vehicles caused people to reduce their spending and purchase more used cars.

In a sign of growing cooperation China’s Haval is now producing cars locally, while in Moscow, the revived Soviet-era Moskvich is using engine parts, design and engineering from China’s JAC.

But another gripe for consumers is the price. Even Medvedev said the Moskvich’s price looked a little high. The model 3 costs around 2 million roubles ($26,195). Prices for the Lada Granta, Russia’s most widely sold car, start at around 680,000 roubles.

“(The Chinese) are bringing in a lot of cars but if we talk about price, not quality, there are no cheap cars at all,” said Maxim Kadakov, editor in chief of the “Behind the Wheel” magazine.

($1 = 76.3500 roubles)