Economy
How the Chinese Took Over the Russian Car Market – At Least for Now
May 27, 2025
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Vladimir RuvinskyJournalist
Journalist Vladimir Ruvinsky looks at the wartime success of Chinese automakers in Russia, which, however, have refused to transfer technology and build new production facilities. The Kremlin is now turning to protectionism to help fledgling local firms, while Beijing looks set to wait until the end of the war to draw conclusions about the Russian market.
The original text in Russian was published in the Moscow Times and is being republished here with the author’s permission.
In mid-May, Russia’s Central Scientific Research Automobile and Automotive Engines Institute (NAMI), an automotive technology development company that is under the Ministry of Industry and Trade and that manages AvtoVAZ, reported news that came as a surprise to many Russians.
It emerged that the cars of the country’s main automaker are half assembled from Chinese and Turkish components. The Lada Granta had the highest level of localization, being just 45.7% Russian made.
In mid-May, Russia’s Central Scientific Research Automobile and Automotive Engines Institute (NAMI), an automotive technology development company that is under the Ministry of Industry and Trade and that manages AvtoVAZ, reported news that came as a surprise to many Russians.
It emerged that the cars of the country’s main automaker are half assembled from Chinese and Turkish components. The Lada Granta had the highest level of localization, being just 45.7% Russian made.
Vladimir Putin visiting Avtovaz factory. January 2025. Source: VK
Diverging estimates
This is almost half the level that AvtoVAZ reports. The head of AvtoVAZ, Maxim Sokolov, said – and not for the first time – the Lada line is more than 90% localized on average, with the Granta, he claims, almost 100% localized.
NAMI analyst Alexander Gorchakov diplomatically attributed the discrepancy in the estimates to potential different methodologies for assessing localization. NAMI uses a point-based one set out by the government in July 2015; AvtoVAZ has its own methodology, based on supposedly actual shares of units and parts.
NAMI tactfully noted that the heads of the Russian auto concern may be telling the truth about import substitution. Yet their words are not backed up by documents. This is because, in reality, automakers are doing the bare minimum required to comply with their localization commitments to the government.
This may well be so. The fewer the documents, the more room to improvise – and with the war and sanctions against Russia, this is an important option. In December, it was reported that AvtoVAZ, without advertising the move, switched suppliers of the Granta’s headlight system, going from an Uzbekistani firm to an Indian one.
Impact of Western suppliers’ exit from Russia
There are likely further reasons for the different estimates on import substitution; another, no less plausible version. The low level of localization is also due to the erosion of Russia’s base of auto part suppliers, which in turn is attributable to Putin’s decision to invade Ukraine.
Before February 2022, many Russian suppliers, which were considered “local” but were actually Western subsidiaries or used their parts to assemble components in Russia, like the Russian plants of Raymond Group and Valeo (France), Autoneum (Switzerland) and Magna (Canada), which produced parts in particular for Lada.
Western auto part manufacturers in Russia also supplied the local operations of Renault, Nissan, Volkswagen, Toyota, Ford, Peugeot and Citroen. When Western sanctions came down in 2022, automakers cut back production and key Western suppliers stopped working in Russia.
This is almost half the level that AvtoVAZ reports. The head of AvtoVAZ, Maxim Sokolov, said – and not for the first time – the Lada line is more than 90% localized on average, with the Granta, he claims, almost 100% localized.
NAMI analyst Alexander Gorchakov diplomatically attributed the discrepancy in the estimates to potential different methodologies for assessing localization. NAMI uses a point-based one set out by the government in July 2015; AvtoVAZ has its own methodology, based on supposedly actual shares of units and parts.
NAMI tactfully noted that the heads of the Russian auto concern may be telling the truth about import substitution. Yet their words are not backed up by documents. This is because, in reality, automakers are doing the bare minimum required to comply with their localization commitments to the government.
This may well be so. The fewer the documents, the more room to improvise – and with the war and sanctions against Russia, this is an important option. In December, it was reported that AvtoVAZ, without advertising the move, switched suppliers of the Granta’s headlight system, going from an Uzbekistani firm to an Indian one.
Impact of Western suppliers’ exit from Russia
There are likely further reasons for the different estimates on import substitution; another, no less plausible version. The low level of localization is also due to the erosion of Russia’s base of auto part suppliers, which in turn is attributable to Putin’s decision to invade Ukraine.
Before February 2022, many Russian suppliers, which were considered “local” but were actually Western subsidiaries or used their parts to assemble components in Russia, like the Russian plants of Raymond Group and Valeo (France), Autoneum (Switzerland) and Magna (Canada), which produced parts in particular for Lada.
Western auto part manufacturers in Russia also supplied the local operations of Renault, Nissan, Volkswagen, Toyota, Ford, Peugeot and Citroen. When Western sanctions came down in 2022, automakers cut back production and key Western suppliers stopped working in Russia.
“China and Turkey then emerged as the main sources for auto parts for AvtoVAZ, which is 75% owned by Renault.”
A Chinese Chery car on a Moscow street. Source: VK
“It’s not the case that it’s all China; it’s more like, let’s say, a little from everywhere,” says a Russian auto expert. “In general, the percentage of auto parts and components produced in Russia is very low.”
In addition, another factor that should not be overlooked is dubious bookkeeping. Back in 2020, experts estimated the level of localization at AvtoVAZ at no more than 50%. The automaker simply failed to account for the share of hidden imports, where a third party purchases a part abroad and then sells it in Tolyatti. The new Russian ownership of auto part manufacturing (here, here and here) could well be continuing this tradition.
The price of the Kremlin’s pivot to the East
After the full-scale invasion of Ukraine, China has taken the place of the global auto brands that exited Russia. Recently, Putin, at a meeting in the Kremlin with Xi, who came to Moscow for the May 9 celebrations, proudly declared: “Russia is now the world’s biggest importer of Chinese cars.”
Ironically, the Russian president, who has been promoting import substitution as a key strategic objective since 2014, is happy about importing more Chinese cars than anyone else in the world.
The Kremlin had invited the Chinese to take a look at the Russian car market so as to prevent it from collapsing and stalling. After February 2022, China received not only market access but also Western, South Korean and Japanese factories in Russia for assembling Chinese cars.
At the German plants of VW in Kaluga and Mercedes-Benz in Solnechnogorsk near Moscow, the new Russian owners began to assemble repackaged cars from the Chinese company Chery. The same was done at the Japanese plants of Mazda in Vladivostok and Nissan in St Petersburg. The Avtodor plant near Kaliningrad, which had rolled out BMWs, also switched to Chinese brands.
This was a largely situational political choice. This was confirmed in 2024 by Putin, who said that Russia “welcomes the active expansion” of Chinese automakers in the country. In 2024, the share of Chinese brands in Russian new car sales reached almost 60% (versus 2% in 2019).
In addition, another factor that should not be overlooked is dubious bookkeeping. Back in 2020, experts estimated the level of localization at AvtoVAZ at no more than 50%. The automaker simply failed to account for the share of hidden imports, where a third party purchases a part abroad and then sells it in Tolyatti. The new Russian ownership of auto part manufacturing (here, here and here) could well be continuing this tradition.
The price of the Kremlin’s pivot to the East
After the full-scale invasion of Ukraine, China has taken the place of the global auto brands that exited Russia. Recently, Putin, at a meeting in the Kremlin with Xi, who came to Moscow for the May 9 celebrations, proudly declared: “Russia is now the world’s biggest importer of Chinese cars.”
Ironically, the Russian president, who has been promoting import substitution as a key strategic objective since 2014, is happy about importing more Chinese cars than anyone else in the world.
The Kremlin had invited the Chinese to take a look at the Russian car market so as to prevent it from collapsing and stalling. After February 2022, China received not only market access but also Western, South Korean and Japanese factories in Russia for assembling Chinese cars.
At the German plants of VW in Kaluga and Mercedes-Benz in Solnechnogorsk near Moscow, the new Russian owners began to assemble repackaged cars from the Chinese company Chery. The same was done at the Japanese plants of Mazda in Vladivostok and Nissan in St Petersburg. The Avtodor plant near Kaliningrad, which had rolled out BMWs, also switched to Chinese brands.
This was a largely situational political choice. This was confirmed in 2024 by Putin, who said that Russia “welcomes the active expansion” of Chinese automakers in the country. In 2024, the share of Chinese brands in Russian new car sales reached almost 60% (versus 2% in 2019).
“Now, China alone has only a slightly smaller share of the passenger car market than Western, Japanese and South Korean automakers, combined, did until 2022 (about 69%).”
The Russian auto industry itself is basically two thirds Chinese: the level of localization of passenger cars produced in Russia in 2024 was only 32.8%.
Betting on protectionism
In welcoming Chinese automakers, Putin cited “fair competition.” The Kremlin saw China as a replacement for the exited global automakers to help keep the Russian auto industry in good shape.
But things have not gone according to plan. China began to squeeze out traditional Russian automakers, and the Kremlin was forced to change its tune – AvtoVAZ is a political issue in Russia. The Russian political leadership definitely does not want to give up the entire car market to China.
The government’s bet on trade barriers is partially paying off. Having been hiked in October, the so-called recycling (“utilization”) fee on imported cars, 80% of which are Chinese, has led to a noticeable increase in their prices.
As a result, the “Chinese” share of the market has dropped to 54.5% in 2025, while the “Russian” share has gone up. That of AvtoVAZ as of March had climbed back up to 31.5% from 27.0% a year earlier (according to Autostat). As a country, Russia dropped to third place in terms of Chinese car exports (Putin got the facts wrong during negotiations again).
The Russian government plans to adjust the recycling fee every year by 10-20% (higher), building a moat around AvtoVAZ.
Betting on protectionism
In welcoming Chinese automakers, Putin cited “fair competition.” The Kremlin saw China as a replacement for the exited global automakers to help keep the Russian auto industry in good shape.
But things have not gone according to plan. China began to squeeze out traditional Russian automakers, and the Kremlin was forced to change its tune – AvtoVAZ is a political issue in Russia. The Russian political leadership definitely does not want to give up the entire car market to China.
The government’s bet on trade barriers is partially paying off. Having been hiked in October, the so-called recycling (“utilization”) fee on imported cars, 80% of which are Chinese, has led to a noticeable increase in their prices.
As a result, the “Chinese” share of the market has dropped to 54.5% in 2025, while the “Russian” share has gone up. That of AvtoVAZ as of March had climbed back up to 31.5% from 27.0% a year earlier (according to Autostat). As a country, Russia dropped to third place in terms of Chinese car exports (Putin got the facts wrong during negotiations again).
The Russian government plans to adjust the recycling fee every year by 10-20% (higher), building a moat around AvtoVAZ.
“In another move to help AvtoVAZ, a law has been passed that forces taxis to transport passengers only in Russian cars from 2026. Of course, it is ordinary Russians who will foot the bill for this protectionism.”
But the boost for the Russian auto industry from these measures, if one materializes at all, will only be temporary. In April, despite everything mentioned above, AvtoVAZ chief Sokolov regularly complained that Chinese automakers were taking over the market for new cars in Russia, even calling for investigations.
Still, his cautious phrasing about the latter likely reflects his lack of confidence about what such investigations would uncover. Putin himself told Xi on May 8 that the Kremlin expects the Chinese to “create production facilities and transfer Chinese industrial expertise to our country.”
Protectionism is no panacea
During the three years of war with Ukraine, Chinese automakers have not opened their own factories in Russia. They have not brought in new technology. They have not even really set up auto part production. Final assembly, metal stamping and electronics adaptation are the maximum the Chinese are willing to do in Russia.
According to NAMI estimates, as of 2024 the models of the most popular Chinese brand, Haval, which opened a plant in Russia back in 2019, were only 15.1% localized. Why does China need more when it has already increased both exports to Russia and local production at the facilities of exited global automakers and alone has taken almost their entire share of the Russian car market?
The Chinese government, citing risks like secondary sanctions, has strongly discouraged its automakers from building production capacity in Russia. Chinese automakers operate all over the world and are thus sensitive to the threat of US and European sanctions. Russia is not big enough outweigh these considerations.
But it is not just sanctions. Even if they are lifted, there are still no compelling reasons for China, the world’s largest exporter of cars, to create a full-fledged infrastructure to make cars and car components in Russia. Why would the Chinese want this, when China today has the capacity to make nearly twice as many cars as its consumers need?
The domestic market in China is the largest in the world, almost as big as the US and European markets combined. Russia has little chance of leveraging protectionist measures to force China to do, in terms of production in Russia, what the brands that exited Russia were doing.
China’s economic domination in Russia at war looks situational, despite all the Kremlin’s talk about a strategic pivot to the East. This year, as soon as hope rose that global brands were about to come back to Russia (many brands still have options to buy back their facilities in Russia), Russians’ enthusiasm for Chinese cars significantly cooled off.
Whether this hope proves unfounded or not, China will wait until the end of the war to make strategic decisions.
Still, his cautious phrasing about the latter likely reflects his lack of confidence about what such investigations would uncover. Putin himself told Xi on May 8 that the Kremlin expects the Chinese to “create production facilities and transfer Chinese industrial expertise to our country.”
Protectionism is no panacea
During the three years of war with Ukraine, Chinese automakers have not opened their own factories in Russia. They have not brought in new technology. They have not even really set up auto part production. Final assembly, metal stamping and electronics adaptation are the maximum the Chinese are willing to do in Russia.
According to NAMI estimates, as of 2024 the models of the most popular Chinese brand, Haval, which opened a plant in Russia back in 2019, were only 15.1% localized. Why does China need more when it has already increased both exports to Russia and local production at the facilities of exited global automakers and alone has taken almost their entire share of the Russian car market?
The Chinese government, citing risks like secondary sanctions, has strongly discouraged its automakers from building production capacity in Russia. Chinese automakers operate all over the world and are thus sensitive to the threat of US and European sanctions. Russia is not big enough outweigh these considerations.
But it is not just sanctions. Even if they are lifted, there are still no compelling reasons for China, the world’s largest exporter of cars, to create a full-fledged infrastructure to make cars and car components in Russia. Why would the Chinese want this, when China today has the capacity to make nearly twice as many cars as its consumers need?
The domestic market in China is the largest in the world, almost as big as the US and European markets combined. Russia has little chance of leveraging protectionist measures to force China to do, in terms of production in Russia, what the brands that exited Russia were doing.
China’s economic domination in Russia at war looks situational, despite all the Kremlin’s talk about a strategic pivot to the East. This year, as soon as hope rose that global brands were about to come back to Russia (many brands still have options to buy back their facilities in Russia), Russians’ enthusiasm for Chinese cars significantly cooled off.
Whether this hope proves unfounded or not, China will wait until the end of the war to make strategic decisions.
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