Russia economy meltdown as automotive industry tanks with car sales plummeting | World | News
The Russian economy is being dealt blow after blow, as vehicles have become unaffordable for many residents and China is beginning to overtake the Russian IT market. Roughly 200 car dealerships, about 5% of those across the country, have been forced to close since the start of the year amid dwindling sales.
China seems to be directly benefiting from Russia‘s woes. Chinese IT firms now dominate Russian app sales and over 50% of all new car sales in Russia come from Chinese brands, according to Kyrylo Shevchenko, Chief of the National Bank of Ukraine on X. He said: “Local production like Lada can’t compete — Russia’s car company AvtoVAZ is cutting working days and blames cheap Chinese imports. “At the same time, China is deepening its grip across the region: $17B [£12.5 billion] in trade deals with Central Asia were signed this June, spanning energy, logistics, and infrastructure. “As #Sanctions isolate Moscow and its partners, China is claiming market share once held by the West,” Mr Shevchenko added.
Alexey Podschekoldin, head of the Russian Automobile Dealers Association, told Autonews that another 30% of dealerships face financial pressures and are at risk of closing. He added that the current economic climate means that the automobile market is not profitable for manufacturers or dealerships.
The average car brand in Russia sells just 12,900 per year—28 times less than in the US—despite the country having nearly three times as many brands. In 2022, just 60 car brands were registered, but thanks to an influx from the Chinese market, this number skyrocketed to 124 by 2025. However, despite this, the number of cars sold in the first six months of the year has decreased by 28% compared with this time last year, according to Dmitry Yeregin, deputy head of the Avtostat analytical centre.
Meanwhile, Chinese IT firms are expanding in Russia, filling the gap left by the West after the invasion of Ukraine in 2022. Russian IT firms are also reportedly laying off staff.
Chinese developers are seeing this less competitive market as an open opportunity, with Chinese applications accounting for more than half of purchases on Russian app platform RuStore, according to Newsweek in January. Three-quarters of these are games, it has been reported.
The departure of Western tech companies such as Microsoft and Adobe in response to Vladimir Putin‘s invasion of Ukraine, combined with Moscow’s move to reverse its ban on cryptocurrency payments, the legalisation of crypto mining and the introduction of the digital ruble in 2023, have opened the door for Chinese tech industries.
Meanwhile, the economy is taking another battering due to Russia‘s high recruitment bonuses, which are vital to help sustain Russia‘s war effort in Ukraine. Last July, Mr Putin was forced to sign a decree more than doubling the standard enlistment bonus for soldiers from 195,000 rubles (£1,848) to 400,000 rubles (£3,791)—nearly five times Russia‘s average monthly wage. These ballooning costs, as well as a labour expansion in the defence industry, have left the country “burning the candle at both ends”, analysts from the Institute for the Study of War have said.
