Racing for luxury: how Russian officials buy the "right" foreign cars

Alexander Dybin

The state order segment for 2022 shrank synchronously with the entire car market.

On the one hand, many government agencies switched to economy mode, on the other – there were no cars in the country physically. In addition, there were problems with spare parts, which also hit official fleets.  This trend is also confirmed by market players.

"In 2022, we saw a catastrophic drop in the new car market. The reduction of supplies, the departure of manufacturers and the continuing shortage of cars are the reasons for the "minus" of 60%. Against this background, the volume of public procurement also decreased in quantitative and financial terms. At the same time, a number of brands themselves have been changed for obvious reasons," the press service of the Association of Russian automobile dealers noted".

According to the press service of the Avtospeccenter Group of Companies, public procurement of cars in Russia in 2022 decreased by 18%.

"The decline in indicators is primarily due to the increase in car prices. Due to the imposed sanctions and the suspension of deliveries, the cost of cars that remained in stock at dealers increased to 30%. many models that were often bought for the needs of state-owned enterprises have ceased to be sold in Russia," the company said, "as part of public procurement, the fleet is replenished with models of Russian and Chinese production. There are still problems with the supply of components in the Russian car market. Parallel import helps to get out of this situation. However, the delivery time is up to 30-60 days."

Of course, the state car order market is not limited to scandalous purchases of premium limousines. Dealers also make purchases of simpler cars: for ordinary employees, for various services like ambulance, police, firefighters. But for this part of the market, there is just the least concern. Instead of people's "Logans" and "Rapids", employees are now being bought "Grants", although deprived of security systems and minimal amenities. And Chinese brands are already making their way through the wilds of public procurement to replace the bestsellers among middle–class officials – Corolla and Camry from Toyota.

"The ministries of the Russian Federation are working on the purchase of cars of Chinese luxury brands, in addition, they purchase Russian cars of the same segment, for example, Aurus Senate," the press service of AVTODOM Group told Novye Izvestia, "the Moscow government plans to buy Moskvich brand cars for business trips. For the needs of the government of the Leningrad Region, cars from China were delivered in 2022. Several dozen domestic cars were purchased for the departments of this region: the ecomilition, Rostechnadzor, the state architectural and construction supervision service of the region".

The company stressed that the fleets of the Ministry of Internal Affairs, the Ministry of Emergency Situations, and emergency medical services in Russia, in addition to cars of foreign brands, include domestic cars, and since the beginning of 2022, there have been no significant changes in the technical equipment of these services.

"However, due to a decrease in the supply of spare parts, the departments expect to continue updating their fleets, mainly at the expense of Russian cars, as well as Chinese cars. So, last year, the Ministry of Internal Affairs of the Russian Federation provided 4.5 billion rubles for the purchase of about 3 thousand cars," the company stressed.

If you really want to

Novye Izvestia studied the documentation on the public procurement portal in recent weeks, as well as analyzed the statistics of state contracts of large dealers, as well as iconic fleets that serve federal authorities. In monetary terms, the appetites of officials have really decreased. Moreover, some fleets have halved spending in 2022. Although it is possible to find car aesthetes who, despite all the restrictions, still want to ride on sub-sanctioned models. There are also officials in our selection who were denied modesty, and they, despite all the rhetoric about saving, cannot deny themselves premium brands.

So among the fresh auctions already in 2023, the purchase of the Sverdlovsk State Academic Drama Theater, which wants to buy a SKODA SUPERB, attracts attention. The initial cost of the contract is 4.1 million rubles. SKODA, as well as its colleagues in the VAG concern, as well as its competitors in the German automotive industry have long since left Russia. But the taste for a good Czech business class still remains. A little more modest, requests from officials from the Irkutsk region, who allocated two million for the purchase of SKODA Rapid. This, of course, is not an elite car, more often it can be found in a taxi or carsharing, but it is strange to demand a brand that has left the country. The same goes for the "Financial University under the Government of the Russian Federation", whose public procurement revealed three contracts of 5 million each. The model of the car is not directly indicated in the documentation, but a correspondence is posted with a potential bidder who asks if it is possible to offer an analogue of the Toyota Camry? And the university answers him: no, you can't. Submit the Camry specifically.

Statistics of the largest dealer in the country, Rolf company, are full of contrasts. In 2020, the seller was very lucky with state contracts, the purchase portfolio amounted to 3.5 billion rubles. But this jackpot was formed thanks to large purchases of patrol cars for the Ministry of Internal Affairs (2 billion) and buses for Mosgortrans (600 million). In 2021, state contracts were already much more modest – 183 million. And in the sanctions and tense 2022 – 232 million .

Among the major contracts last year was the purchase of 8 Hyundai Sonata cars for 33 million for the Supreme Court of the Russian Federation. The office of the Governor of the Orenburg region bought seven Hyundai Elantra for 17 million, the automobile industry of the Republic of Dagestan four Hyundai Sonata for 14 million. And the administration of Labytnangi practically snatched the last three Mitsubishi Outlanders at 3.5 million apiece.

Premium cars were also sold. Thus, the "National Medical Research Center of Otorhinolaryngology of the Federal Medical and Biological Agency" bought GENESIS for 8.8 million, and the authorized representative of the Republic of Buryatia under the President of the Russian Federation purchased a certain car for 5 million, but it was not possible to establish the brand from the documents published on the public procurement portal. There is also a purchase that sounds like a joke: the municipal autonomous institution "Culture-Service" from the village of Zalari, Irkutsk region, bought a supported Lexus RX350 car for 4.5 million.

The statistics of another major dealer, Avilon, are even more revealing. In 2021, he earned 1.9 billion rubles from public procurement, in 2022 – only 479 million. Last year, the dealer was supported by Rosgvardiya, which bought more than 100 Hyundai Solaris and Hyundai Sonata. 87 million was brought by FSBI MOTOR TRANSPORT COMBINE, which bought 11 cars of the elite Genesis brand.

And what about the buyers? We have also studied the contracts of three car companies that serve the government of the Russian Federation, ministries, federal institutions and the State Duma: FSBI "AVTOBAZA No. 2", "TRANSPORT COMBINE "RUSSIA" and "MOTOR TRANSPORT COMBINE". These structures were also squeezed in 2022, both in terms of buying cars and in terms of servicing their fleet.

So, AVTOBAZA No. 2 has halved its expenses – up to 300 million in 2022, including gasoline, utilities and other expenses not directly related to cars. The largest automotive item of expenditure is the supply of spare parts for BMW, Ford, Hyundai, Genesis brands - for more than 70 million rubles in total. The TRANSPORT COMBINE "RUSSIA" has cut spending twice – to 588 million, the Federal State Budgetary Institution "MOTOR TRANSPORT COMBINE" has tripled: from 1.2 billion to 412 million. In 2021 , the structure managed to buy

39 BMW 750Li xDrive M Sport Pro and 30 Hyundai Sonata for a total of 500 million. In 2022, they spent only on spare parts.

The reverse was the situation in the procurement of the SMOLNINSKOE institution, which deals with the fleet of the government of St. Petersburg. This structure, on the contrary, increased spending more than twice in 2022 – up to 722 million rubles. Last year, 60 Hyundai_Sonata for 150 million and 21 Genesis for 137 million were bought for officials of the northern capital. A similar structure in the capital - GBU "AUTO FARM" almost did not change the amount of spending - 176 million rubles. The institution did not conduct car purchases in 2022. But the "AUTO farm" of the Moscow region slightly reduced spending – up to 900 million, most of this amount – 528 million went to the private company "MOSOBLTRANS-1" for renting cars that carry officials.

According to Anton Shaparin, Vice-president of the National Automobile Union, difficulties may arise with the maintenance of foreign cars that various government agencies have bought in recent years, but they will be solved not by officials, but by contractors.

"It's more and more difficult with maintenance, the same Genesis, which officials have been actively transplanted to in recent years, has shown problems with consumables, there are understandable difficulties with the German automotive industry," the expert says, "but these are difficulties of organizations that provide repairs, with which a contract has been concluded. But taking into account the size of the contracts, there is money there for more expensive spare parts".

As an employee of a car company serving the fleet of the government of one of the regions told Novye Izvestia, there really were difficulties with repairs in 2022.

"The short-term was sorted out, but if you need something more serious, the car goes into idle for a long time," the interlocutor said, "The Polo, on which my colleague worked, stood for five months waiting for a new spare part. And so it is with many models".

Watch your hands

The topic of car purchases for officials often causes scandals, especially when luxury cars are bought. Therefore, over the years, we have found a lot of ways to buy an interesting car and not draw attention to it. For example, expensive cars can be purchased by subordinate enterprises of municipal unitary enterprises, state unitary enterprises or joint-stock companies. It is easier for them to carry out the purchase in silence, without publishing a full package of documents.

"Then this CBM "finds out" that it is too expensive to maintain a BMW limousine", - says an interlocutor familiar with the scheme, "the director writes to his founder, "take it, remove it from the balance," so the car moves to the state structure, for which it was originally planned".

There are examples when a car is sold together with a legal entity. This happened in the Chelyabinsk region, when a new BMW appeared in the garage of the already former governor Boris Dubrovsky. But it was not possible to detect the purchase. At the same time, journalists found out that shortly before the appearance of this car, the former state-owned enterprise, transferred to the form of LLC, but still owned by the Protocol region, which was engaged in organizing official events, absorbed an unknown company. And shortly before this transaction, the authorized capital of the company increased 9,000 times from 10 thousand rubles to almost 10 million. It is assumed that this is the cost of the same car. However, the governor did not have time to enjoy the acquisition, he was dismissed shortly after appearing in the BMW garage.

Another life hack is car rental. Many government agencies do not buy expensive cars, but simply rent them. As a rule, this is served as a way to save money.

"The situation that is developing now is interesting", - says Anton Shaparin, vice-president of the National Automobile Union, "senior officials operate cars that are rented, and therefore can afford any cars. For example, a scandal erupts with the Land Cruiser 300, which are operated in Bashkortostan, they belonged to a charitable foundation, and then ended up in the garage of officials. It turns out, as in the joke, "Dad, will you drink less now? No, you'll eat less now." Elite cars will remain in the parks of officials, it will simply be more expensive, and all the difficulties with maintenance and logistics will fall on the firms that provide them. As for replacing foreign cars with Chinese cars, it's more complicated here. The Chinese are represented mainly by crossovers, and this is not a very popular body among officials, sedans and minivans are more appreciated. I think if we wait a bit, we will see the same German cars that officials have been used to for a long time".