After the outbreak of the Russia-Ukraine war in February 2022, Western corporations have been gradually withdrawing from Russia. Seizing the opportunity, Chinese automakers have entered the Russian market in droves to fill the void left by foreign brands. However, the good times may not last long, as Bloomberg reports that this easy market entry for Chinese automakers could come to an end.
In October 2024, Russia announced a significant increase in scrap taxes by 70% to 85% (specific increase ratio determined by engine displacement), continuing to rise by 10% to 20% annually from January 2025 until 2030. As a result, the import costs for Russia will significantly increase.
According to Bloomberg, prices for some imported passenger cars in Russia have risen by over $8,000. Additionally, Russia’s high borrowing costs have put pressure on consumers, leading to a 27% shrinkage in car sales in the first half of the year. The quantity of Chinese cars imported into Russia during the same period plummeted by 62%.
The report cited Rosalie Chen, a senior analyst at research firm Third Bridge, who mentioned, “Chinese brands have captured nearly 50% to 60% of the overall market share in Russia, and future growth may be constrained by local policies and market capacity. Moreover, with the expected end of the Russia-Ukraine war, Western automakers are gradually seeking to re-enter the Russian market, which could slow down the growth of Chinese car sales.”
Demand from Russia helped China become the world’s largest car exporter in 2023. Chinese customs data shows that nearly one-fifth of China’s whole car exports went to Russia last year.
Bloomberg states that the contraction of the Russian market has impacted the top three Chinese car brands with the best sales in Russia. In the first eight months of this year, exports from Geely Automobile Holdings Ltd. decreased by 8%, while exports from Great Wall Motor Co. remained relatively stable. Although exports from China’s largest car exporter, Chery Automobile Co., grew by 11% during the same period, it was significantly lower than the 25% increase from the previous year.
The export of cheap Chinese cars has sparked increasing resistance from more countries. Europe and the United States have imposed anti-dumping measures on Chinese cars, and Canada, Turkey, and Brazil have also taken similar actions. Even Russia, economically dependent on China after the outbreak of the Russia-Ukraine war, cannot resist the influx of Chinese cars and has had to take measures to protect its domestic enterprises.
The China Passenger Car Association (CPCA) data indicates that due to Western sanctions on Russia following the Russia-Ukraine conflict, cutting ties between Western brands and Russia, China’s car exports to Russia reached seven times that of 2022 in 2023.
The CPCA stated that the surge in Chinese car brands has led to a market share in Russia reaching 63% at one point, while the market share of Russian domestic brands fell to 29%.
This prompted Russia to announce a significant increase in scrap taxes in October 2024. The Financial Times quoted Gregor Sebastian, an automotive analyst at Rhodium Group, in a report in March this year, stating that Russia, like other countries, is concerned that the influx of cheap Chinese cars will disrupt domestic manufacturing.
The collapse of the Russian market has intensified the pressure on Chinese manufacturers to expand their overseas exports, as they are already dealing with domestic price wars and overcapacity issues.
Starting this year, Mexico has surpassed Russia to become the country with the highest volume of Chinese car exports. On September 4, Mexican President Claudia Sheinbaum stated that Mexico is considering imposing new tariffs on goods from countries like China that have not signed trade agreements with Mexico.
According to previous reports from Bloomberg, the new tariffs will cover a variety of products including cars, textiles, and plastics, aimed at protecting Mexican businesses from the impact of cheap imported goods.