- Chinese car makers have filled the void left by foreign automakers in the Russian market due to international sanctions and the invasion of Ukraine.
- Chinese brands have made billions of dollars in Russia, profiting from the Western corporate exodus.
- Car sales in Russia dropped due to Western sanctions, but Chinese brands stepped in and demand started to pick up.
- By mid-2023, six out of the top ten most popular car brands in Russia were Chinese.
- Russia has become the number one buyer of Chinese vehicles, spending $6 billion in the first four months of 2023.
- Chinese automakers see Russia as an opportunity due to excess capacity and struggling EV strategies in China.
- However, Russia poses challenges and may not be a big consideration for Chinese automakers in the long run due to market constraints and geopolitical risks.
- Chinese automakers may face bad publicity in Western Europe if they make a big push in Russia.
- The expansion of Chinese automakers into the Russian market highlights the closer ties between Beijing and Moscow, but the long-term risks and unpredictable nature of doing business in Russia remain a question.

China is now the world’s largest auto exporter with Russia becoming its biggest buyer this year. The Ukraine War and Western sanctions on Russia opened business opportunities for Chinese automakers to move into Russian factories. But what are some of the risks facing Chinese carmakers as a result of working in Russia?

WSJ explains how Chinese car brands profited from Moscow’s invasion of Ukraine and Western sanctions and what it means for Russia’s automobile market. 

0:00 International sanctions
0:50 Russia’s automobile market
1:48 China capitalizes on sanctions 
2:56 Risks for China’s carmakers

News Explainers
Some days the high-speed news cycle can bring more questions than answers. WSJ’s news explainers break down the day's biggest stories into bite-size pieces to help you make sense of the news.

#China #Russia #WSJ

In 2019, this new BMW marked the start of a new production in a car plant in western Russia.

Today, it is Chinese cars coming off the assembly line.

The factory produced tens of thousands of vehicles including Ford trucks, German BMWs and South Korean Hyundais every year until Russia's invasion of Ukraine.

As international sanctions prompted foreign automakers to leave the country, Chinese brands filled the void, making billions of dollars.

Car makers who have been struggling in the domestic market in China, they're finding an opportunistic moment when it comes to the Russian market.

Here's how Chinese car makers are profiting from the Western corporate exodus and what it means for Russia's auto market.

Car making is 1 of Russia's main industries.

It employed some 300,000 people directly and produced vehicles and parts worth about $42 billion in 2020.

The first Renault created for the Russian market.

Foreign automakers opened factories and partnered with local brands, pushing Russia into the ranks of the world's top car producers.

And Russians eagerly embraced foreign cars, with Japanese, Korean and European brands dominating the market for years.

But Moscow's invasion of Ukraine hit the industry hard.

Western sanctions cut off Russia's access to global supply chains for essential parts such as computer chips, prompting many foreign brands to halt production or withdraw from the country.

Soaring inflation and uncertainty contributed to a dramatic drop in car sales in the country last year.

But assembly lines didn't stay idle for long.

Demand started to pick up as Chinese brands stepped in.

Car dealerships across Russia started reopening under new brands.

For example, this showroom outside Moscow changed from Nissan to KaiYi from China.

Russian buyers became more familiar with Chinese cars.

Chinese SUVs have even been spotted in the Kremlin's motorcades.

By mid-2023, the list of the 10 most popular car brands in Russia looked very different to before the war.

This year, Russia became the number 1 buyer of Chinese vehicles, spending some $6 billion in the first 4 months of 2023, helping China to become the world's largest auto exporter.

The exports to Russia have got an outsized importance, especially for the carmakers who have struggled to pivot to a successful EV strategy.

Within China, the sales of petroleum-powered vehicles have dropped, so they now have some excess capacity and Russia presents a good opportunity for these car makers.

But Russia's market also poses challenges.

As Chinese car brands become more mature, I think a lot of them are seriously considering the prospect of 1 day becoming the world's biggest auto manufacturer.

And in the grand scheme of things, Russia may not be a big consideration for them because of the constraints in this market at present.

Chinese automakers are also not immune to the bad publicity that comes with working in Russia.

In June, in a symbolic gesture, Ukraine branded Chinese maker Zhili as a sponsor of war for continuing operations in Russia.

Companies like Geely have multiple brands and some of these brands are trying to explore the Western European market.

So if they make a big push in Russia, then it may cause them other problems in terms of geopolitical risks because it may not be well regarded in front of Western European consumers.

Zhili declined to comment on the challenges related to its operations in Russia.

Russia's Afterdoor plants, which now produces Chinese passenger cars, didn't respond to a request for comment.

Chinese automakers' expansion into the Russian market highlights the ever closer ties between Beijing and Moscow.

At the moment, the relationship appears to be mutually beneficial.

However, the question is whether Chinese brands are willing to keep taking the risks associated with Russia and manage the unpredictable nature of doing business there in the long run.


Speaker 0: In 2019, this new BMW marked the start of a new production in a car plant in western Russia. Today, it is Chinese cars coming off the assembly line. The factory produced tens of thousands of vehicles including Ford trucks, German BMWs and South Korean Hyundais every year until Russia's invasion of Ukraine. As international sanctions prompted foreign automakers to leave the country, Chinese brands filled the void, making billions of dollars.

Speaker 1: Car makers who have been struggling in the domestic market in China, they're finding an opportunistic moment when it comes to the Russian market.

Speaker 0: Here's how Chinese car makers are profiting from the Western corporate exodus and what it means for Russia's auto market. Car making is 1 of Russia's main industries. It employed some 300,000 people directly and produced vehicles and parts worth about $42 billion in 2020. The first Renault created for the Russian market. Foreign automakers opened factories and partnered with local brands, pushing Russia into the ranks of the world's top car producers.

And Russians eagerly embraced foreign cars, with Japanese, Korean and European brands dominating the market for years. But Moscow's invasion of Ukraine hit the industry hard. Western sanctions cut off Russia's access to global supply chains for essential parts such as computer chips, prompting many foreign brands to halt production or withdraw from the country. Soaring inflation and uncertainty contributed to a dramatic drop in car sales in the country last year. But assembly lines didn't stay idle for long.

Demand started to pick up as Chinese brands stepped in. Car dealerships across Russia started reopening under new brands. For example, this showroom outside Moscow changed from Nissan to KaiYi from China. Russian buyers became more familiar with Chinese cars. Chinese SUVs have even been spotted in the Kremlin's motorcades.

By mid-2023, the list of the 10 most popular car brands in Russia looked very different to before the war. 6 of them were Chinese. This year, Russia became the number 1 buyer of Chinese vehicles, spending some $6 billion in the first 4 months of 2023, helping China to become the world's largest auto exporter.

Speaker 1: The exports to Russia have got an outsized importance, especially for the carmakers who have struggled to pivot to a successful EV strategy. Within China, the sales of petroleum-powered vehicles have dropped, so they now have some excess capacity and Russia presents a good opportunity for these car makers.

Speaker 0: But Russia's market also poses challenges.

Speaker 1: As Chinese car brands become more mature, I think a lot of them are seriously considering the prospect of 1 day becoming the world's biggest auto manufacturer. And in the grand scheme of things, Russia may not be a big consideration for them because of the constraints in this market at present.

Speaker 0: Chinese automakers are also not immune to the bad publicity that comes with working in Russia. In June, in a symbolic gesture, Ukraine branded Chinese maker Zhili as a sponsor of war for continuing operations in Russia.

Speaker 1: Companies like Geely have multiple brands and some of these brands are trying to explore the Western European market. So if they make a big push in Russia, then it may cause them other problems in terms of geopolitical risks because it may not be well regarded in front of Western European consumers.

Speaker 0: Zhili declined to comment on the challenges related to its operations in Russia. Russia's Afterdoor plants, which now produces Chinese passenger cars, didn't respond to a request for comment. Chinese automakers' expansion into the Russian market highlights the ever closer ties between Beijing and Moscow. At the moment, the relationship appears to be mutually beneficial. However, the question is whether Chinese brands are willing to keep taking the risks associated with Russia and manage the unpredictable nature of doing business there in the long run.

See all The Wall Street Journal transcripts on Youtube

China Is Now the World’s Top Car Exporter: How the Russia-Ukraine War Helped | WSJ