Russian automakers are reaching out to new markets in a bid to move their dependency away from a very challenged domestic scene.
One of the leaders of this trend is luxury carmaker Aurus Motors, which has started production of its F-Class Senat sedan in Dubai, according to Russian Minister of Trade and Industry Denis Manturov. He says: “We are planning an expansion (to other countries). First, we will thoroughly cement our presence in the UAE (United Arab Emirates), then move ahead,” he says in a statement cited by several Russian state-owned media.
“Our further plans include opening the first showroom in the UAE,” Svetlana Matsyashek, press secretary for the automaker, says in a telephone conversation.
A growing number of similar initiatives could be heard this year from automakers across Russia. In the car segment, just two days after Aurus’ launch in the UAE, UAZ announced new memorandums of understanding with two Cuban companies to assemble its all-terrain vehicles and pickup trucks on the island, and followed up the next day with similar plans for Ghana in Africa. Earlier this year, AvtoVAZ disclosed plans to resume vehicle manufacturing in Africa and Central Asia after a temporary suspension in 2022. These are signs that Russia is re-launching its automotive export program.
Russian automakers are perceived as small minnows in terms of overall global sales. That’s not helped by massive legislative and administrative barriers to potential exporters and a lack of governmental support for international trade.
Yet, things appear to be slowly changing. In the middle of the past decade, Russia set out on a new export-oriented course, resulting in some of the hurdles being gradually removed and cross-border trade sporadically growing. In the last prewar year of 2021, local automakers increased their new-car sales abroad by 37% year-over-year to almost 90,000 vehicles. This is a relatively humble figure compared to top exporters, but AvtoVAZ and GAZ secured presence in the developed markets of Australia and Japan with their low-cost all-terrain vehicles. Sales in the European Union also surged and UAZ was preparing a rollout in the U.S. with its SUVs rebranded as Bremach.
In January 2022, car sales were anticipated to further grow with more dealerships and assembly lines abroad. However, by that time, rumors circulated that AvtoVAZ suspended the supply of semi-knocked-down kits to an assembly facility in Zaporizhzhya in Ukraine, seen as a precursor to Russia’s invasion of Ukraine, albeit denied by the company. During the first half of 2022, Russian automakers’ volumes of car sales and manufacturing abroad came to naught even in their core markets of Kazakhstan and Belarus.
Now they are busy restoring old partnerships and building new ones. In addition to the plans by UAZ and Aurus, Avtovaz is working to resume production on assembly lines in Kazakhstan and Egypt and also launch production in Uzbekistan with a goal of exporting 50,000 vehicles in total in 2024, a threefold increase from this year’s level of 15,000.
This time, the situation is different for the companies. On the darker side, the important markets of Ukraine and Western countries are now effectively lost for them. Furthermore, Russia still lags behind major automotive nations in quality of trade support services.
On the brighter side, the value of Russian ruble has fallen some 30% during the war, making Russia-made vehicles attractively affordable for consumers in poorer countries. Also, the companies’ motivation to expand abroad has grown because of stagnation in the home market. Their new focus is now on countries in Northern and Eastern Africa as well as Middle East countries such as Iran, Turkey, Oman, the UAE and Egypt. This is especially true for the Aurus. Unlike Autovaz and UAZ, which used to proliferate in the domestic budget-vehicle market, the luxury carmaker cannot sustain itself if isolated from the global market. Last year, it sold a mere 31 vehicles in Russia, a sliver of its target annual production of 5,000 vehicles.
Not coincidentally, AvtoVAZ declines to confirm plans to produce Lada cars in Ethiopia as reported by state media. Some other plans are real and eventually will pay back in terms of sales volume. However, for this to happen the Kremlin must avoid placing stress on its automotive industry as it did when it invaded Ukraine in February 2022.