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China fills the void of foreign brands left behind by Russia

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Chinese cars, televisions and smartphones are replacing German and South Korean imports in Russia as its market is reshaped by sanctions and an exodus of brands following Vladimir Putin’s invasion of Ukraine.

The result is disrupting trade, as Russia tries to insulate itself from further disruptions by sourcing products from countries that have not joined the sanctions imposed by the United States and its allies. Moscow is also rewriting rules to allow its sovereign wealth fund to invest in the currencies of China, India and Turkey, after sanctions blocked purchases in euros and dollars.

“Apart from Chinese cars, there is nothing,” said Vladimir, a metal industry executive who bought a new Tiggo SUV from Chery Automobile Co. in Moscow this month. He did not want to give his last name.

“However, there are a fair amount of options and, surprisingly, the cars are very good,” he noted.

The war has accelerated Russia’s tilt toward Asia, and changes that once took years have occurred in months. The transformation sets in motion a process that began near the beginning of Putin’s more than two decades of rule, with similar changes in the economy, from the banking sector to energy sales.

Vehicle sales for Great Wall Motor Co. and Geely Automobile Holdings Ltd. were flat in July, despite the auto market plummeting 75% from a year earlier, pushing their brands into rows of best-selling cars. Last quarter, 81% of new car imports were Chinese, down from 28% in the first quarter, according to data from Avtostat.

In an Aug. 24 report, the Russian central bank noted that business confidence in the car trade turned positive for the first time since the February invasion, as the market shifted from European producers to Asian vehicles.

Samsung dethroned

The smartphone market has also swung in favor of China, with Apple Inc. and Samsung Electronics Co. suspending shipments. Although its products are available through parallel, or gray, imports that are not approved by manufacturers, these sales can turn off consumers because they are more expensive and come with no warranty.

Xiaomi Corp. was Russia’s best-selling smartphone maker in the second quarter, dethroning Samsung, and three of the top five brands were Chinese, according to Mobile TeleSystems PJSC, the country’s top mobile operator.

“A redistribution is taking place,” said Alexey Zaitsev, director of the telecommunications division of e-commerce platform Ozon Holding Plc. “We are seeing increased demand for Android smartphones from Chinese brands.”

Demand for Chinese TVs nearly doubled after the invasion as Japanese and Korean companies halted shipments, Izvestia newspaper reported last month, citing online retailers.

The boom comes at a time when retail sales have suffered their worst drop since the coronavirus pandemic, shrinking by nearly 10% monthly in annual terms between April and June. Household spending in Russia accounts for more than half of gross domestic product.

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