The Russians are almost no longer buying new cars, the car market is collapsing

The Russians are almost no longer buying new cars, the car market is collapsing

It’s a real collapse. While inflation is at a record level (+ 17.8% in April) and sanctions against Russia are increasing, Russian consumption fell by almost 10% in April compared to last year. As for the car, new cars are hardly bought anymore. In May, sales fell by 83.5% year on year. According to the Association of European Enterprises (AEB), which brings together manufacturers in the sector, only 24,268 new light vehicles have been sold. It is almost five times less than in France. Compared to April, this is a decrease of 52%.

Decline in car production

The drop in sales began in March after Western countries imposed severe sanctions on the sector, in particular a ban on the export of spare parts to Russia. In addition to sales, it is the production of cars, which is one of the most affected industries in Russia. The withdrawal of many foreign brands (eg Renault) from the country and the cessation of spare parts supplies have forced many local factories to stop. In April, car production fell by 85.4% in one year.

Since the entry of Russian troops into Ukraine on February 24, a number of manufacturers have also announced the cessation of sales of components or cars in Russia or the cessation of production in Russia. Renault sold its assets in Avtovaz to the Russian state, but most production was stopped, forcing tens of thousands of employees to take paid leave for months.

Renault sells its shares in Avtovaz in Moscow, but retains the opportunity to return to Russia within six years

Russia has also relaxed vehicle production standards on its territory and allowed the production of cars without ABS or airbags due to a lack of electronic components and spare parts.

All Russian industrial production is in the red

Apart from cars, industrial production in Russia has fallen red for the first time since the beginning of the conflict in Ukraine, according to data released last week by the Rosstat statistical office. Industrial production – an indicator of the temperature of the economy – fell by 1.6% in April. Compared to March 2022, it even fell by 8.5%, which is a big drop after a very dynamic start to the year. If the automotive industry remains the most affected sector, the mining sector has also made a difference, with coal production falling by 6.5% in one year and 8.2% in one month. In particular, Europe has decided to impose an embargo on Russian coal since August. Oil and gas production fell by 3.6% in one year and by 10.9% in one month. Authorities want to be reassuring, making sure sanctions barely hit the economy, and predict that after a recession of around 8% this year, the country should return to growth in 2024.

The worse is yet to come

But economists believe that the worst is yet to come, as the impact of sanctions will be more visible and will affect Russians’ incomes.

To reassure consumers, Russian President Vladimir Putin said at the end of May that “according to experts, inflation growth has slowed (…) by the end of 2022 will not exceed 15%.” He also announced a 10% increase in pensions and the minimum wage from June 1, as well as an increase in child allowances. Unemployment fell slightly to 4.0% in April, up from 4.1% a month earlier. The labor force decreased by 0.3% in April compared to the same month in 2021.

To explain the surprisingly low unemployment, Renaissance capital analysts pointed to the “continuing decline of the working population due to aging and also the consequences of COVID-19” at the end of April, as well as the “labor leak”. from work”. Rosstat reported more than 660,000 new coronavirus-related deaths in 2020 and 2021 in a country already facing a declining working population. In addition, the pandemic and the subsequent conflict with Ukraine have left a large number of foreign workers in Russia. To this was added the end of February, the departure of tens of thousands of Russians and the beginning of the conflict in Ukraine.

Despite low unemployment, Russians’ incomes are likely to be hit: to avoid layoffs, many companies, sometimes employing tens of thousands of people, are taking advantage of the partial unemployment that accompanies wage cuts.

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