Sanctions on Russia: the Russian auto industry is running out of power

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For now, everything is fine. In the Kremlin-led propaganda war, the “storytelling” of the impact of Western sanctions on the Russian economy has been carefully polished. Officially, the economic machine is somehow resisting, with the rise in commodity prices – oil, gas and coal – largely offsetting the decline in deliveries. And it will be the West, and above all Europe, that will pay the heaviest price in this trade and economic war. That’s it for official speech. The truth is much less pink.

While Russia has managed to divert some of its oil exports to Asia (especially China and India) at the lowest prices, all segments of Russian industry have been hit hard by the harshness of the sanctions and especially the embargo on component exports. This is the state of the automotive industry. It literally collapsed in six months. “The market fell 70% in July compared to July 2021 figures,” says Igor Yurgens, economist and chairman of the Russian Association of Insurance Companies. According to figures compiled by the company Sia Conseil, sales from foreign manufacturers fell: – 89% for Skoda in the first five months of 2022, – 84% for Renault, – 91% for Volkswagen. Production at Russian factories would also fall by 56% between January and end-April compared to the same period in 2021, with knock-on consequences for suppliers and subcontractors.

“Factories are idle”

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“This collapse is not insignificant, because before the war the Russian car market ranked eighth in the world,” says Jean Pierre Corniou, deputy general manager of Sia Conseil. A 2019 study by the EY firm detailed the potential of this market while the equipment ratio of the Russian population is significantly lower than in the West: 371 passenger cars per 1,000 and 928 per 1,000 people, compared to 642 in Western Europe. North America.

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“The factories are idle today,” continues Jean Pierre Corniou. First of all, it is “deteriorated” new cars that come to dealers: due to the lack of access to components, new cars no longer have ABS brake systems, Airbags, traction control systems, anti-pollution sensors in the exhaust pipes. Vehicles that will not have the right to be sold on the European market. At the old Renault factory in Moscow, which was sold to the city, an old brand from the Soviet era – Moskovitch – could run the machines to produce electric vehicles… at best.

repair puzzle

In the repair market, the situation turns into a nightmare for foreign vehicle owners. Spare parts are running out while the garages are running out of stock. As in the days of the USSR, the system of parallel imports of spare parts (even official smuggling) is being reborn. With ingredients from Turkey, India, Armenia or Kazakhstan. “Except that they cost much more and they arrive two or three months later,” complains one Russian observer, who prefers to remain anonymous.

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How long can Russia last? “Famines will really start to be felt in November,” said Igor Yurgens. An old Soviet joke is widely spoken in Moscow: “In the West you have lived better than us, but in Russia we suffer better than you”.


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Source From: Google News

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