(Bloomberg) — Russian car sales plunged 84% in May, as sanctions and international isolation brought an industry that had once been a showcase for foreign investment to a near standstill.
Fewer than 25,000 vehicles were sold last month, according to the Association of European Businesses, the lowest since at least 2006 and less than a tenth of the monthly levels seen in peak months in the past.
President Vladimir Putin’s Feb. 24 invasion of Ukraine spurred a wave of sanctions from the US and its allies, as well as disruptions of supplies from a broader range of countries. The isolation hit the foreign-dominated auto sector especially hard, with the exodus of overseas producers worsened by the industry’s heavy dependence on imported components.
“A few suppliers still haven’t sold out all their stocks, so that’s what’s selling,” said Azat Timerkhanov of consultant Avtostat. “But they’re running out rapidly.”
Only two of Russia’s more than 20 auto factories are operating now, a locally owned one and a Chinese plant, he said. European and most Asian producers suspended shipments of cars, while even companies from countries that didn’t join the sanctions were faced with logistics problems.
“There’s a search underway for alternative suppliers — usually Chinese,” he said, but there’s no certainty yet that it will succeed.
The Russian government has taken over some major plants from foreign companies that left, including the legendary Moskvich factory in Moscow. They’ve already announced plans to sell stripped-down models without imported safety and emissions technologies.
“Our auto industry relied on foreign components,” said Georgy Ostapkovich, a specialist on the sector at Moscow’s Higher School of Economics. “There were practically no factories that didn’t work on foreign platforms. Russia was just an assembly line.”
“We’re facing primitivization and we’ll fall behind the rest of the world by a decade,” he said.