Western exodus from Russia could benefit Chinese automakers

Chinese automakers could benefit in Russia after global brands halt exports to the country and suspend production at Russian factories amid the Ukraine crisis.

Volkswagen Group, BMW Group, Hyundai and Toyota are among automakers that have halted output at their Russian plants after Western governments imposed sanctions on the country following its invasion of Ukraine. Others including Porsche and Bentley have stopped exporting to Russia.

Chinese automakers operating in Russia have so far been silent on whether they will continue do business in the country.

Russia has become an important market for Chinese brands including Great Wall's Haval, along with Chery and Geely, mainly for sales of crossovers and SUVs.

"In the event that U.S. and European Union sanctions on Russia stay for a prolonged period of time and U.S. and European carmakers become effectively prohibited from doing business in Russia, there is potential for Chinese automakers to gain share in the Russia market," Eunice Lee, senior analyst focusing on Asian autos at bankers Bernstein, a bank, said in a report.

China has yet to place sanctions on Russia, allowing its businesses to continue operating.

Geely said its Russia operations "had basically stopped" in a statement to Automotive News Europe but did not elaborate further.

Vehicle exports from China to Russia trebled to 122,800 in 2021 from 42,700 in 2020, Bernstein said.

Great Wall builds vehicles in Russia at a plant in Tula state, close to Moscow, while Geely has a factory in Russia-aligned Belarus.

Chery has been in talks with a local plant to assemble cars in Russia, local industry analyst company Autostat reported last year.

Last year, 18 percent of the 1.67 million light-vehicle sales in Russia were imported, with the remainder built locally, Autostat said.

Haval was Russia's 12th best-selling brand in 2021 with 39,126 sales. Chery was No. 13 with volume of 37,118 and Geely was No. 16 with 24,587, according to figures from the Moscow-based Association of European Businesses.

In February, Haval and Chery were the 10th and 11th best-selling brands, respectively, according to AEB. Geely was 13th, while Chery's upmarket Chery Exceed brand was No. 19, ahead of Toyota's Lexus. The Haval Jolion compact crossover was the country's 16th best-selling model.

Renault-owned AvtoVAZ leads the market with the locally produced Lada brand and 24 percent of the market in February, AEB figures show. Kia was second with a share of 13.8 percent.

Renault has not publicly discussed its strategy in Russia, its second-biggest market globally, but its options are not good as production collapses.

A Jefferies analyst predicted vehicle output in the country will fall by 70 percent in 2022.

"It would be perfectly legitimate for Renault to consider an exit from AvtoVAZ," Philippe Houchois told Bloomberg. "Renault could take the loss, but an exit would be a tough decision."