BOFIT Viikkokatsaus / BOFIT Weekly Review 2016/42
About 1.5 million new passenger cars were sold last year in Russia which is about half of the peak levels before the current crisis. Car sales have declined already for three years and in the first nine months of 2016 were down 15 % y-o-y.
Last year, 1.2 million cars were produced in Russia, and another 350,000 cars were imported. Imports as a share of consumption have declined notably over the past decade as the result of foreign car makers putting up assembly plants in Russia. Majority of Russian production today is assembly work. The average degree of localisation is only about half, however, because local component production simply does not exist. Imports have also been reduced by high import duties that Russia must gradually lower in coming years under its WTO commitments. Russia also introduced a vehicle recycling fee in a 2012 which has been contested in WTO.
Russia last year exported about 100,000 passenger cars. Car exports have fallen for two years and in the first half of 2016, they fell further 30 % y-o-y. Demand has been weak in Russia’s main export markets, the CIS countries. Exports to Kazakhstan this year collapsed with the introduction of vehicle recycling fees. Russian brands are mostly not competitive outside the CIS and the export competitiveness of Russian assembly production is hampered e.g. by high logistics costs.