9 out of the top 10 sales are Chinese brands

Authors | Wang Lei, Liu Yajie

Editor | Qin Zhangyong

To succeed in overseas markets, start by entering Russia.

If we had to choose the most successful country for Chinese automakers to venture overseas, Russia would definitely be one of them, because Chinese cars are selling extremely well in Russia!

According to the Russian website A-souz, in June this year, about 124,000 new passenger cars were registered in Russia, of which about 76,000 were Chinese brands.

This means that Chinese cars have already captured over 60% of the Russian market.

This is incredible for any country. Chinese independent automotive brands have only surpassed 50% in China in the last two years, and in June, the share of independent brands was 58.5%.

After seeing the surge of Chinese cars in the Russian market, some people even lamented: There is no auto industry left in Russia.

01 Both carmakers and car dealers are profiting

Russia has become the top choice for Chinese automakers to go overseas.

According to autoAstat website statistics, in 2023, Russia became China's largest automotive export destination for the first time. Sales of Chinese brand cars in Russia reached a record 553,000 units, 4.4 times the sales in 2022.

In the first five months of this year, selling cars to Russia remained China's best export business, with 372,500 exported vehicles, twice the export volume of Mexico (190,600 units), which was in second place.

Following this trend, the overall number of exports to Russia this year will also maintain a high growth rate compared to last year.

Moreover, last year, Chinese car brands only occupied 6 seats in the top 10 sales rankings, but in June this year, among the top 10 automotive brands in Russia, except for the local brand Lada, the remaining 9 were all Chinese brands, namely Haval, Chery, Geely, Changan, Omoda (Chery), Starway, Belee (Geely), Jettour, and Jaecoo (a sub-brand of Chery).

Although Lada, as a Russian local automotive brand, also ranked first with a year-on-year sales growth of 43.8%, its market share has dropped from 28.8% at the beginning of the year to 27.5%.

Various signs indicate that Chinese automakers have firmly established themselves in the Russian market.

Cost-effectiveness is one of the reasons why Russians like Chinese cars. For example, the Haval Chulian series, priced at 2.779 million rubles (about 232,000 yuan), as a compact SUV equipped with a 1.5T turbocharged four-cylinder engine, has even become one of the top three sellers in the Russian automotive market in June.

Maxim Ryazanov, a local automotive industry expert in Russia, once said that most models produced in China have low maintenance costs and are equipped with turbocharged engines, providing strong power.

Not only gasoline-powered vehicles but also new energy vehicles are in high demand in Russia.

Some "middlemen" engaged in parallel exports said that the domestic price range of Li Auto L9, which costs 409,800-439,800 yuan, could once sell for 11 million rubles (about 900,000 yuan) in Russia.

Moreover, Russian tycoons are fascinated by the intelligence of Chinese cars. Concepts such as refrigerators, color TVs, large sofas, and automatic parking have refreshed Russians' perception of cars. Due to the booming business, it has even given birth to an industry dedicated to flashing Li Auto's infotainment system to Russian.

In the field of electric vehicles and hybrids, Li Auto ranks first in sales, selling about 5,000 units in Russia in 2023, all through parallel imports.

And Xiaomi SU7, which was only launched in March this year, also caught up with this wave.

In May, a Russian company was exposed to have purchased 40 Xiaomi SU7s at once, requesting a wet asphalt exterior, Galaxy Gray interior, Nappa leather, and basic equipment.

There was even a dealer who directly priced the Xiaomi SU7 Max version at 7,225,000 rubles (about 629,000 yuan), while the same configuration model can be purchased for 299,900 yuan domestically.

02 A victory without smoke of gunpowder

Chinese cars can sweep the Russian market due to favorable timing and location.

One undeniable fact is that against the backdrop of the Russia-Ukraine conflict, many multinational automakers are withdrawing from the Russian market, leaving a gap that has been quickly filled by Chinese brands.

After the conflict, Toyota, Nissan, Mazda, Honda, Mitsubishi, Renault, and many other automakers announced the suspension of production and sales in Russia. According to incomplete statistics from Chaodian Lab, more than 20 multinational automakers have chosen to temporarily withdraw from the Russian automotive market.

After the foreign brands withdrew, it was originally thought that it would give local brands an opportunity to surge ahead, but unfortunately, Russia's automotive industry is too weak.

Russian local brand "Lada" cars have become "bargain" in the eyes of locals for many years, and neither their appearance nor performance can meet mainstream demand. Most of them are low-to-mid-end models, and even if they vacate market share, they cannot seize the market in a short time.

At this time, the market still required a large supply, and a seemingly coincidental but inevitable opportunity emerged.

Chinese enterprises, which have always been eager to "go overseas," began to directly take over Russia's existing but still idle high-quality dealer networks and blank markets.

In 2022 alone, 487 new Chinese auto sales stores opened in Russia.

Many people say that Chinese cars are "taking advantage of the situation," but in fact, this is not the case. Filling the high-end market demand is an important reason why Chinese cars can succeed in Russia.

Amid a severe shortage of automotive resources, the prices of local cars in Russia have been rising, but their quality remains unimpressive.

According to autoAstat website statistics, the weighted average price of passenger cars in Russia has risen to 2.4 million rubles, while the weighted average price of Chinese cars has reached 3.2 million rubles.

In comparison, Russians prefer Chinese cars with slightly higher prices but far superior quality to local brands.

Of course, it's not that automakers from other countries don't want a piece of the pie and try to compete with Chinese brands in Russia.

For example, India's Tata Motors, which focuses on economical segment models, has already launched in Russia, and Iranian automotive brands IKCO and Saipa have also made their debut. Saipa even announced its entry into Russia at the end of 2023.

These automakers' current intention to enter the Russian market is obvious: to seize the void left by Western cars and gain a competitive advantage.

But unfortunately, either they haven't officially entered the market yet or they are completely invisible in the Russian market.

Moreover, an interesting fact is that Russia's automotive technical regulations are stricter than Germany's, which has already shut out many automotive brands from Russia.

In other words, without sufficient technology, one cannot enjoy the fruits of others' labor.

However, it should be noted that while Chinese brands are selling well, they also face many problems.

For example, there are design issues with vehicles. Since most of Russia is located in frigid regions with low winter temperatures, this may exceed the limits of Chinese cars during design and testing.

Previously, most of the vehicles exported from China to Russia were sturdy SUVs and pickup trucks. Now, as market share continues to expand, more types of vehicles are being exported to the Russian market, which can easily lead to problems in Russia for models that pass quality control in China.

There have been examples of this. ZTE once donated a batch of pickups to Russian traffic police to open the Russian market, but soon after, the rear compartments of the pickups rusted and fell off.

In addition, another problem is that European, American, Japanese, and Korean brands are likely to return to the Russian market in the future.

Previously, automakers such as Nissan and Renault sold their factories in Russia, which they had operated for many years, for "1 yuan," seemingly withdrawing from the Russian market entirely. However, most of these automakers that sold their assets stipulated in the resale terms that they could repurchase their assets within a certain period in the future.

In other words, these automakers have already planted the seeds for their return to Russia.

As for whether Chinese cars can still maintain their advantage in Russia at that time, it depends on how they cultivate brand appeal in Russia.