In January-August, only 430,305 cars were sold. According to experts, the market in 2022 may lose about 70% of its volume. Similarly, production failed with sales: in January-July it fell by 64.2%, to 300 thousand units.
Most of the world's auto companies operating in Russia stopped deliveries of components and stopped their factories. Of the factories, only UAZ and the Chinese Haval worked, at the end of summer they launched the AvtoVAZ conveyor, which began producing Granta and Niva in simplified trim levels - without electronic security systems such as ABS, EPS and ERA-GLONASS.
For several months he has been developing a plot around the revival of the Moskvich brand, which was announced by the authorities of the capital. The Muscovites are going to be produced at facilities that previously belonged to Renault. The French concert sold the plant for one ruble. Recently, we have held several presentations, talking about what a revived brand can be like.
So the plant showed several design options for a new car, in which they recognized the cars of the Chinese brand JAC, which has been trying to gain a foothold in the Russian market for about a decade. But it didn't have much success. For example, the now forgotten brand "Tagaz" is just the reversed Chinese. But after the presentation, the Moscow authorities said that this was only a “possible example” of what the new Moskvich might look like.
Another option was voiced by representatives of Iran, who announced an agreement to produce Iran Khodro cars in Moscow. This brand is known to Russian motorists, it was supplied to the country in the 2000s and 10s, but then left the market. Later there was information that Turkey could also take part in the production of these cars. But Moskvich again issued a refutation: there are no agreements with Iran.
The story is similar with trucks. Western companies announced the curtailment of business, mainly related to sales and services. There were also assembly plants in Russia. For example, in Miass (Chelyabinsk region) the Iveco-AMT plant worked. He specialized in a narrow segment of all-wheel drive trucks, direct competitors of URALs, which, by the way, are assembled at a nearby industrial site. IVECO has announced its exit from the business. According to the SPARK database, the enterprise is now 100 percent owned by Vladimir Novik, who was a partner of the Italians. As an interlocutor familiar with the situation in the Ural city told Novye Izvestia, Iveco-AMT was idle for some time, but has now resumed production.
“Initially, there was information that part of the production would be transferred to Kazakhstan, as some manufacturers have already done, for example, the Irbit Motorcycle Plant, which produces Ural motorcycles,” the source said, “but then these plans were abandoned, and production was launched again. Of which components, new or those that were already in stock, it is not clear.
Restoring a full-fledged automobile production in Russia, not assembling from imported parts or pasting nameplates on ready-made cars, but full-fledged production from screws to electronic circuit boards that control the engine and gearbox, is not an easy task. There are many assembly plants in the country, but most of them are standing, either the owners decided so, or there is no supply of parts. First of all, the problem arises with components that are not produced by us.
According to experts, too many car factories have been created in Russia. It sounds paradoxical, but it's true. Too many enterprises assemble cars, too many market players, and it was simply not interesting for businesses to invest in the production of components, because they would have to focus on a particular plant and brand, which means significantly limiting sales.
According to State Duma deputy, member of the Committee on Industry and Trade Vladimir Pavlov , the shortage of components, in particular electronic ones, and the low localization of production are a significant challenge for the Russian automotive industry.
“There are many car factories in the country, but almost all of them were idle due to problems with the logistics of components,” he says, “the production of internal combustion engines for cars in July 2022 fell by 63.5% compared to July 2021, to 10.4 thousand tons. units. Bodies for 7 months in the Russian Federation were produced 20.3 thousand pieces. (-11.1%). Difficulties in the segment of spare parts for body repair and sanctioned dual-use parts. Due to a shortage of components, AvtoVAZ, for example, decided to produce Lada Niva and Lada Granta without anti-lock wheels, a dynamic stabilization system that keeps the car from skidding, without ERA-GLONASS. Difficulties were added by the departure of Bosch from the Russian market, with its products from engine control systems to fuel equipment. The prospects for the development of the Russian automotive industry have long been based on the belief that Western players, having come to our market with SKD, will gradually localize their production here as much as possible, organizing the production of components on our territory, and share their competencies with Russian partners. However, there are still many tasks to build a component industry in the Russian Federation.
By 2022, more than twenty factories were operating in Russia, capable of producing more than 3 million cars a year. Sales at the same time were twice less. In 2021, only 1.66 million cars were sold.
“Now the situation has turned upside down: after Western automakers left Russia, the remaining players do not produce the required number of cars. First of all, because of the lack of components,” the deputy notes. - Nevertheless, it should be understood that the automotive industry is one of the most cooperative sectors of the world economy, and the products are almost entirely international. No company in the world has 100% localization, this is how the automotive industry works, so doing everything on your own is inefficient. If we have countries that we can rely on (for example, China), it makes no sense to engage in full localization. So, restructured imports give us today 80.6% of new cars from China, 7% from South Korea, 2.6% from Japan. The leader of the Tuesday market is Japan (87.4%), 2.8% comes from Belarus, 2.3% comes from the USA”.
One of the main fears in the automotive market is the expansion of Chinese manufacturers. They have been doing this work for a long time, and now entire market niches are being vacated for them. For example, last year Kamaz announced the Compass medium-duty truck, which will have to work in urban areas. So, at the heart of this model is the same JAC.
The activity of Chinese automakers can be traced, for example, in the city of Miass, where quite large enterprises have grown over the past few years that specialize in the development and creation of various attachments for the Urals.
“They bought chassis at the car factory, and they hung everything that the market needed, kungs, compressors, generators, converted them into fire trucks, special equipment, road and utility vehicles,” says a market participant, “this year the car factory closed all deliveries these enterprises. Now there are active negotiations with suppliers from China. And they still choose with whom to work. If these ties are established and the Chinese replace the Urals, it will be very difficult to return these partners. The story is similar with buyers. Heavy all-wheel drive equipment works in extreme conditions. And all the talk about the fact that "KAMAZ" and "Urals" are cheaper than imported counterparts - have nothing to do with business. Buyers of such equipment do not look at the price, they look at the resource and carrying capacity. If the car can take more cargo and go longer, they will take it despite the fact that it is twice as expensive, because downtime brings more losses. Another aspect is the cost of components, KAMAZ took a lot from Mercedes, if parallel imports are established, the price for these parts will be high, this will, of course, go into the cost of the car”.
Stanislav Tverdokhleb, head of the Propus Center for the Development of Industrial Innovations, looks at the situation with great optimism.
“I think that we will be able to restart and there will be suppliers of components,” he says, “in the 90s, when Moskvich disappeared and AvtoVAZ felt bad, more enterprises producing spare parts appeared. And without investments and loans. Now these companies are ready to develop components similar to Western ones and supply them to factories. Now these enterprises have grown to spare parts for foreign cars, we have a lot of such competencies. It is clear that they need support, they need orders and volumes. For example, in Russia we produce snow groomers - complex equipment for processing snow on ski slopes. The percentage of localization in them is 90%. The control system, sensors, hydraulics, hoses - everything is Russian. So we can. The problem is that one part of the market does not know about the other. Now is a unique time when goods worth 10 trillion rubles, which we bought from unfriendly countries, left the market. But even China is not convenient now, because it works for the mass segment. It is necessary to order in advance and in large quantities, but these are risks. It is much easier to negotiate with local manufacturers for small lots. In addition, China no longer gives discounts like before”.
According to State Duma deputy Vladimir Pavlov, two strategic documents are currently under development: a strategy for the development of the automotive industry until 2035 and a similar document for AvtoVAZ.
“The strategy prepared by the Ministry of Industry and Trade involves self-reliance - ensuring technological sovereignty, localizing production at a level of at least 80%, creating a full-fledged industry for the production of necessary components and assemblies, turning the country into a technology exporter,” says Vladimir Pavlov, “the main objectives of the new strategy are stimulation of production and demand through state support, creation of auto component production, mainly in the field of power units and active and passive safety systems. This will require 500-600 billion rubles. until 2035 and the same amount to support exports. For comparison: the total amount of state support for the automotive industry over the past five years amounted to 387 billion rubles. Basically, these were funds for programs of preferential car loans and leasing, subsidies for manufacturers for the development of gas-powered and electric vehicles, and for the purchase of various types of equipment at the expense of the budget. The production priorities of the strategy include organizing the production of small diesel engines, automatic transmissions, anti-lock braking systems (ABS), and airbags. With the competitiveness of Russian technologies, they should be an absolute priority for car manufacturers, the authors of the strategy insist.”
It is said in the strategy and engineering developments. True, research and design of auto components, most likely, will require additional funds. Thus, according to some estimates, it is necessary to invest a total of 2.7 trillion rubles in development. until 2035. For the past five years, Russian auto industry enterprises have invested 0.2-0.5% of their revenues in engineering surveys per year, now this amount needs to be increased up to 10 times.
“According to the Ministry of Industry and Trade, the peak of the shortage and growth in the cost of cars has been passed”, - says Vladimir Pavlov, “as AvtoVAZ’s capabilities are restored, the market will receive more offers, and demand will decrease. Then conveyors will be launched at Motorinvest, Moskvich and Avtoframos. At the beginning of next year, it is planned to start production of the “anti-crisis” Lada Vesta, which will also receive a limited configuration without electronic assistants and a number of other options. In general, AvtoVAZ plans to produce up to 800,000 anti-crisis vehicles a year. With the advent of new suppliers, the machines will be assembled in full versions with all electronic equipment. It is planned that ABS blocks will be produced by Chinese suppliers. An active search for new partners is underway.”
The situation is more complicated with premium cars. At the moment, there is a ban on production at the Avtoframos Kaliningrad plant, where BMW, Hyundai, KIA and other brands were assembled. Volkswagen has announced that it has no production plans in Russia for 2022. Korean brands are silent.
“Despite the fact that a certain segment of the market will be occupied by Chinese brands, some experts suggest that the Russian auto industry and the car market may follow the Iranian path. Massive sanctions were imposed on Iran in 2012: the volume of the Iranian car market in 2011 (1.59 million cars) is comparable to the volume of the Russian market on the eve of the sanctions (1.54 million in 2021), says Vladimir Pavlov, - both states in the economic plan to place a significant emphasis on the oil industry, both seek to create a large-scale own auto industry. If Russia repeats the path of Iran, then in 2023 the market may decrease by about 2 times compared to 2021. However, entrepreneurs and citizens are adapting to the conditions of the sanctions, demand, including for cars, is recovering. The departure of the majority of brands that have densely occupied the market for several decades provides not only difficulties, but also opportunities: attractive niches are released that can be successfully occupied with competent consolidation of existing market players”.
State Duma deputy Valery Gartung believes that the Chinese auto industry can replace European auto and auto components at the first stage, and as import substitution progresses, the government should "equalize" the conditions for Russian manufacturers with import duties.
“There is no panic, I know the situation from the inside, in contact with plant directors and industrialists. I have the most extensive experience in mechanical engineering, 34 years ago I started in the business with the production of spare parts for passenger cars, then it was in short supply, and they scattered like cakes. Now the same story, everything repeats itself. There is a shortage of spare parts, and enterprising people - and they have not died out with us - will figure out how to make this or that product. Demand will be satisfied, - believes Valery Gartung. “But we need to support manufacturers. Give cheap loans, reduce costs. For example, the excise tax on liquid steel hit the automotive industry hard. This led to the fact that the marginality of steel sales abroad increased, but domestic prices for the metal also increased. In addition, we need anti-dumping legislation. Such duties exist, for example, in the tire market. But the Chinese bypass them, import tires with wheels, this is a different commodity code, dismantle and sell tires. Similar story with bearings. All this requires fine tuning. And one of the main factors is the availability of demand. It is possible with an adequate exchange rate. At a price of 60 rubles per dollar, we will not sell a single Kamaz outside the country. I think that for the automotive industry a more adequate exchange rate is 75 rubles per dollar and 85 per euro”.