- [Narrator] In 2019, this new BMW marked the start
of a new production in a car plants in Western Russia.
(audience applaud)
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.
- [Narrator] Here's how Chinese car makers are profiting
from the Western corporate exodus and what it means
for Russia's auto markets.
Car making is one 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.
- [Narrator] 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.
(tank fires)
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.
Demands 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.
Six of them were Chinese.
This year, Russia became the number one buyer
of Chinese vehicles, spending some $6 billion
in the first four months of 2023,
helping China to become the world's largest auto exporter.
- The exports to Russia have got an outsize importance,
especially for the car makers 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.
- [Narrator] But Russia's markets also poses challenges.
- As Chinese car brands become more mature,
I think a lot of them are seriously considering the prospect
of one day become 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.
- [Narrator] 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 Geely
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 real political risks
because it may not be well regarded
in front of Western European consumers.
- [Narrator] Geely declined to comment
on the challenges related to its operations in Russia.
Russia's after door plants,
which now produces Chinese passenger cars,
didn't respond to a request for comments.
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.
(tense music)