Chinese car giants playing a risky game in Russia

“The absolute best case in Russia for the Chinese companies pales in comparison to their worst case in those partnerships,” said Sonnenfeld.

While Volvo and Mercedes joined the pullout from Russia a year ago, they and other companies linked to the Chinese carmakers still operating in Russia could face political pressure to sever ties with those that do business with Russia and indirectly support Putin’s “war machine,” he said.

Geely declined several requests for comment. Representatives for Volvo Car and Mercedes said they don’t comment on other companies.

The top three Chinese carmakers in the Russian market — Chery, Great Wall and Geely — have been able to “fly under the radar” because they’re not well known in Europe or the US, said Marina Rudyak, an assistant professor for Chinese Studies at Germany’s Heidelberg University.

The companies shouldn’t underestimate the amount of support people in Europe have for Ukraine, Rudyak said. “I think this is something that surprised China the most. Our gas prices doubled and for many people it’s tough. China and Russia didn’t expect the EU countries would be ready to take this on.”

Great Wall Motors, the only Chinese automaker to have a manufacturing facility in Russia, was reported by Chinese state broadcaster CCTV to have sold its Haval SUV to the Russian military in 2021. Haval’s website said it has subsidiaries in Australia, the US, and a sales network spanning over 60 countries and regions. Still, its export sales are a fraction of its domestic market, reducing its exposure to any potential backlash.

The rewards Chinese companies are reaping in Russia are small compared to the geopolitical risks they’re taking.

The company, which also has a partnership with BMW AG to produce electric Mini vehicles in China, declined requests for comment.

While Chery — the top-selling Chinese brand in Russia last year — is the second-largest Chinese car exporter globally after state-backed SAIC Motor Corp, its main markets are in the Middle East, South America and Africa, where there has been a distinct lack of action against companies continuing to operate in Russia. Chery has a joint venture in China with Jaguar Land Rover.

Chery didn’t respond to calls and emailed requests for comment.

The rewards Chinese companies are reaping in Russia are small compared to the geopolitical risks they’re taking.

In 2022, Chery’s sales in Russia averaged 4,475 vehicles a month; Great Wall averaged 2,940 a month and Geely, which sells its own models such as Coolray and Atlas, averaged just 2,035 deliveries a month, according to data from Russian analytics firm Autostat. Russia’s top-selling model in 2022, the Lada Granta, sold an average 7,331 units per month.

Russian vehicle sales have fluctuated wildly in the past decade, plunging 36 per cent in 2015 after the country was sanctioned for Moscow’s annexation of Crimea. The volumes haven’t recovered to the peak of around 2.9 million seen in 2008 and 2012, according to the Association for European Businesses. The Russia new-car market last year was less than 5 per cent the size of China’s.

There’s a reason why Great Wall is the only one of the three biggest Chinese automakers in Russia that has established a manufacturing base there, said Temur Umarov, a fellow at the Carnegie Endowment for International Peace.

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“Russia is an unpredictable place to work in, and no one knows what’s going to happen,” said Umarov, who worked for Chinese automaker Lifan Technology Group in Moscow between 2016 and 2018. “An economic crisis is on the horizon and the purchasing power of the people is very low.”

Bloomberg

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