Page 135 - RusRPTAug22

Decoupling has never been more important. Russia’s automotive industry employs 300,000 people and 3mn more work in related industries. But in July 2022, over 120,000 unsold cars had piled up in dealerships due to high prices and collapsing demand.
“The prospects are unclear. Production will degrade a lot, as many critical components (engines and their parts, transmissions, control units, high-precision metal parts) are gone and no replacement is in sight. This translates into s maller volumes and a return to 30-year-old technologies with higher costs per unit,” explained Suverov.
The US tightened its export controls in May, banning the sale of an extra 200 products to Russia and bringing its sanctions regime into better alignment with the EU’s existing measures. New items added to the sanctions list include catalysts, boring tools, reaction engines, motors, pumps and machines for finishing metal.
Russia’s government has promised to accelerate its programme of import substitution. But it will take years of research and huge investments in domestic production before Russian carmakers will be able to produce modern cars with digital components sourced exclusively from within Russia. Western sanctions have made parallel imports harder to find, even from manufacturers in non-Western countries who are reluctant to risk financial penalties.
“Import substitution can cover only a limited number of relatively low-tech components, (simple plastic parts and mechanisms). Some components can be made with the help of reverse engineering (the Ministry of Industry and Trade is already financing this),” Suverov explained.
“Any parts substituted will suffer from lower quality and higher price (this double threat had been a big problem even before the sanctions, now it will get worse). Most likely, part of the solution will be grey and black import of components from other countries branded as Russian,” he added.
New car sales data serve as a predictor of consumer sentiment. Due to their high value, cars and other big-ticket items are often the first to register declining demand.
In its most recent figures, the Bank of Russia expects a GDP contraction of between 4-6% in 2022, followed by further contraction in 2023. Other analysts are making still bleaker forecasts. The road ahead looks rocky for Russia.
135 RUSSIA Country Report October 2020 www.intellinews.com