Russia's car industry sinks to levels seen in early months of invasion

Russia's car industry, which went through "clinical death" after the exit of Western car manufacturers and then saw partial recovery in 2023-2024, is once again collapsing. Between January and September, car production fell back to the lowest level seen in 2022.

Source: The Moscow Times, an independent Amsterdam-based news outlet

Details: Data from Russia's Federal State Statistics Service (Rosstat) shows that car production in Russia fell by 20% in the first nine months of the year, returning to 2022 levels. The decline has been faster each quarter: output dropped by 9.2% year-on-year in the first quarter, 23% in the second, and 26.7% in the third.

In the first year of the full-scale war, the car industry lost approximately 50% of its output and total car production in Russia declined to 450,000 units – the lowest level since the early 1970s, before the establishment of car factories in Gorky and Tolyatti in the Soviet Union.

By mid-2024, production had reached 80% of prewar levels, but it has since fallen back to 50%, according to Janis Kluge, Senior Associate at the German Institute for International and Security Affairs. The steepest decline was seen among lorry manufacturers, whose output dropped 30% over nine months and 41% in September alone.

Sales of new cars in Russia fell by 22% between January and September. Compared to the early 2010s, sales have decreased by two to two and a half times as cars have become less affordable for Russian consumers, according to The Moscow Times.

"There are no clear signs that consumer purchasing power will rise in the next year or two. This year has seen an almost perfect storm," market participants said.

Background:

• On 29 September, Russia's largest car manufacturer, AvtoVAZ, switched to a four-day working week for up to six months.
• The Russian government has slashed funding for the development of a national modular platform for electric vehicle production.
• AvtoVAZ has been unable to launch mass production of the new Lada Iskra due to a shortage of spare parts.
• The Russian government has added French carmaker Renault SAS to its sanctions list following reports that the company may be producing drones for Ukraine.

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