Analysis of the auto parts market in Russia

Automotive Industry in Russia – Facts and Figures

Russia is one of the leading automotive manufacturers worldwide. In 2021, the country produced nearly 1.4 million vehicles. The value of exported cars from the country was significantly lower than the import of passenger and commercial vehicles. One of the reasons for the trade deficit was the fact that exports of the domestic Lada brand to the European Union (EU) were suspended in 2018 due to environmental regulations. As part of sanctions in response to the war in Ukraine, the European Union, the United States, the United Kingdom (UK), and Japan banned the export of luxury cars to Russia in March 2022. In addition, the Russian government banned the export of passenger cars.

Foreign automakers exit Russia

International automotive companies such as Mercedes-Benz, Volkswagen, BMW, Toyota Motor, Nissan, General Motors, Audi, Skoda and many others temporarily or permanently left the Russian market in 2022, affecting thousands of employees in the country. For example, Renault Group had about 45,000 employees in Russia before leaving the market. In total, nearly 60,000 employees of the automakers that left Russia have lost their jobs. Volkswagen, Renault Group and Toyota Motor were among the 10 most profitable foreign companies in Russia in 2021.

Passenger cars

The Russian car market is expected to continue growing, reaching 390,000 vehicles per 1,000 people in 2025. Moscow has the largest passenger car fleet in the country, followed by the Moscow region and the Krasnodar Territory. Lada was the primary brand with new registrations in June 2022. Lada vehicles are manufactured by the Russian company AvtoVaz, which was jointly owned by Renault until May 2022. The French company, which owned 68% of AvtoVaz, was sold. They were handed over to the Russian Central Research and Development Institute of Automobile and Motor Vehicles, a state-owned entity, for one Russian ruble. The transfer agreement reportedly included a clause with Renault’s option to buy back its shares within six years.

Commercial vehicles

The production volume of commercial vehicles and trucks in Russia is significantly lower than that of passenger cars. However, unlike the passenger car sector, domestic manufacturers of commercial vehicles outnumber foreign companies in terms of production. GAZ and OAO are the leading manufacturers of light commercial vehicles across Russia, while KAMAZ dominates the heavy commercial vehicle sector. All three companies were headquartered in Russia.

In May 2023, more than 42 thousand passenger cars were produced in Russia, which is almost double compared to the previous month. Production volumes fell sharply in March 2022, reaching less than four thousand units in May 2022.

The number of cars in operation per 1,000 people in Russia is expected to increase steadily between 2023 and 2028 by a total of 35.3 cars (+9.43%) (after the fifth year of increase).

Number of new passenger cars sold in Russia 2022-2027

In 2022, almost 630 thousand new passenger cars were sold in Russia. Sales volumes decreased by 58% compared to the previous year, due to the withdrawal of several Western brands in response to Russia’s invasion of Ukraine. In the following years, until 2027, this indicator is expected to gradually increase, although it will still remain below the 2021 figure.

Since March 2022, auto parts have risen in price by an average of 27.7%. However, rare items from discontinued brands and “Freez” have risen in price by 50-60% at once.

It is obvious that the prices of domestic spare parts (LADA) have increased the least, and this growth was mainly influenced by the brands of those manufacturers that left the Russian market in response to the political events initiated by Russia.

“Stocks [of spare parts from European manufacturers] are running out, but there is no stable parallel import, there may be one-off deliveries, supply chains are not very reliable, the situation is still far from stable,” said a representative of the Union of Russian Automobile Manufacturers. Notes from motor insurers

This situation greatly affects the repair – there are no problems with consumables, but the rest have to wait a long time. This affects the timing of repair work at the service station. Therefore, car owners turn to alternative manufacturers.

Does the exchange rate determine prices?

Parallel imports work despite the efforts of manufacturers in Europe to control and limit supplies. Yes, it is unstable, but most of them have already made logistical plans, and the demand for parallel import services is not decreasing. At the same time, imported parts are highly dependent on the dollar rate. 2022 showed strong currency fluctuations, which led to a sharp increase in prices.

Parallel import suppliers are afraid of new changes in the exchange rate against the ruble, so they initially set the rate much higher, which affects the final prices for the consumer.

How does this affect consumer behavior?

Russians quickly adapted to the new reality. It is important to understand that in Russian automotive culture it is customary to take care of your car and choose the best available. In this regard, there are not many fakes left on the market, they simply do not last long on the market, because there is no demand for them.

Car owner forums are full of tests of new “non-original” spare parts, such articles are very popular – Russians want to find out how long the new spare parts will serve them.

Russians are willing to try new brands, and also independently find specialists who can bring original spare parts from other countries or find similar ones in China.

There is also a significant increase in demand for products that can extend the life of car parts: lubricants, additives.

Which car brands were least likely to be repaired in 2022?

 

What awaits the automotive market in 2023?

The automotive trade forum “ForAuto 2023” is being held in Moscow. Experts summarized the results of the Russian automotive market and made forecasts for the coming year.

Forecasted growth in 2023

The forum experts noted that the largest decline was shown by the most numerous segment of the automotive market – passenger cars (-59%). The light commercial vehicle (LCV) segment performed slightly better, with a decrease of 48%. But in the cargo segment, the fall at the end of the year is small (-17%), and in January 2023, trucks generally showed growth (+9%).

According to experts, from April 2023, the Russian car market will begin to grow. The basis for such a judgment is that just in April last year, the market for new passenger cars in Russia fell to very low levels (less than 30,000 units) and only in November it overcame the mark of 50,000 units. Thus, in April 2023 (if current trends continue), the car market will be able to achieve a positive trend and continue to grow until the end of the year.

The customer changes his behavior

In 2022, sales of premium cars fell. The current political and economic situation has affected consumer behavior. Previously, premium cars were easily purchased on credit to demonstrate the status of the owner. Currently, buying a car is associated with assessing the cost of future services, and prices due to fluctuations in the ruble and a complex supply chain do not add optimism to customers.

According to an online survey of automakers, Russians do not expect the car market to recover – 49.8% of respondents expect the market to decline by 10% to 20%. Understandably, in 2022, car prices rose, but Russians did not begin to earn more.

The situation in the Russian spare parts market. Main trends

Experts say that there is no longer a shortage of spare parts on the Russian market. At least not like a year ago. Alternative supply channels have been created.

However, according to average estimates, spare parts will increase in price by 20-40% compared to last year. This is primarily due to logistics costs and currency fluctuations.

The demand for parts and services will increase only in 2023. As we know, Russians are not willing to buy new cars and prefer to repair an existing one or buy a used one.

The process of replacing spare parts is gradually improving, the choice of parts has now increased, which is contributing to greater customer loyalty. Another modern trend noted by experts: the service market is quite stable, mainly due to the stagnant demand for buying a new vehicle and the increase in the number of car passengers across the country.

Chinese automakers capture Russian market share in 2022

Chinese brands are becoming the main beneficiaries of the withdrawal of Western automakers from Russia, with market share increasing from under 10 percent in January to almost a third now.

Main suppliers of spare parts

It is important to understand that the Russian market coped well with the departure of most manufacturers. For most categories, analogues have been found and supply chains have already been created.

China remains the main partner – analogues come from there. In addition, last year we managed to restore logistics. Despite the fact that the ports of the Far East are still busy, logistics have become much easier.

Iran will be the second supplier. I already wrote that Iran is gradually entering the Russian market and has already presented car models. Therefore, ports on the Caspian and Black Seas are preparing for deliveries from Iran.

Turkey also remains a strong player. A lot of parallel imports enter the country through Turkey. Auto parts are rapidly passing through this country, and turnover will only grow.

Russian spare parts market prepares for autumn: main changes

Major suppliers of auto parts have begun to increase wholesale prices by 5-7% due to the continued depreciation of the ruble. Prices for spare parts in online stores have already begun to rise, in stores and service centers price increases are expected by autumn.

After a 50-70% increase in prices for auto parts in Russia in the spring of 2022, their cost has stabilized. In the first half of 2023, the prices for auto parts did not change significantly. In 2022, traditional supply channels were disrupted, and after the withdrawal of global automakers, their official dealers simply did not know where to get parts now.

The EuroAuto car service network has provided data on the dynamics of prices for original spare parts for specific car brands for 2022 and 2023.

The main price increase is expected by the fall

Ilya Plesev, a member of the board of the Russian Union of Auto Services, estimated the price increase at 5-7%, linking it to the exchange rate.

” Practically all wholesalers raised prices in rubles by 5-7% over the past month. Retail prices follow wholesale prices, and the markets supplied by the importers themselves are the first to react. Also, prices in car services that do not have their own warehouses immediately increase, then, when updating the assortment, retail stores also change prices.”

The share of original spare parts is decreasing

The share of non-original spare parts has increased significantly. Now many car services have switched to purchasing spare parts in China, where the production of parts has been launched not only for Chinese cars, but also for cars of world brands.

The trend of switching to non-original spare parts was also noted by the www.Drom.ru service. This explains the decrease in prices for a number of goods in the first half of 2023. In particular, the increase in the share of non-original shock absorbers and the growing popularity of brands with a low-cost production line are very noticeable.

On September 1, 2023, the government decree was due to expire, temporarily allowing the supply of auto parts to Russia without costly certification tests. However, on July 10, at the request of car dealerships and services, the government extended it for another year.

Export of Iranian cars to Russia

According to reports, Saipa is scheduled to deliver 45,000 cars worth $450 million to Russia over the next three years. Another automaker, Iran Khodro, is also currently going through the process of exporting to Russia.

According to the newspaper Aerostea, the Russian dealerships of Volkswagen, Kia, Skoda, Citroen, Opel, Renault and Hyundai currently offer more than 300 cars on their websites, but experts say this is not enough to meet the needs of the population.

The vice-president of the National Automobile Union in Russia said that the import mechanism implemented by Moscow after the withdrawal of Western brands from the country could fill Russian warehouses and stabilize prices, but at the same time complained about the cost of logistics and customs clearance, which, they say, can make imports expensive.

Three Saipa vehicles that have received permission to enter the Russian market: Shahin, Quick and Saina

Key and important factors for the presence of Iranian manufacturers in the Russian market

According to the initial research conducted on the spare parts industry in the large Russian market and considering the key factors:

High and continuous quality of manufactured products

Preferential tariffs on import duties of Iranian goods to Russia

Low export costs of Iranian products to Russia compared to Western and Chinese goods

The proximity and proximity of Iran and Russia as a logistical advantage and the possibility of exporting Iranian goods to Russia by various methods such as land, rail and sea transportation in the shortest time and at low shipping prices

The absence of a large part of the market from famous Western brands

The possibility of rapidly expanding market share and access to the competitive and trade space in Russia

It can be said that there is a high economic justification for entering the large Russian-Eurasian market, and the Fardad Group of Companies is proud to establish effective and successful joint cooperation in this direction.