Chinese auto giants are playing a risky game in Russia

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

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

Geely declined several requests for comment. Volvo Car and Mercedes officials said they would not comment on other companies.

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

Businesses should not underestimate the support of the people of Europe for Ukraine, Rudjak said. “I think that’s something that surprised China the most. Our gas prices have doubled and it’s tough for a lot of people. China and Russia did not expect that EU countries would be willing to adopt this.”

Great Wall Motors, the only Chinese automaker with a manufacturing facility in Russia, has been reported by Chinese state broadcaster CCTV to have sold its 2021 Haval SUV to the Russian military. Haval’s website states that it has subsidiaries in Australia, the US and a distribution network in over 60 countries and regions. Still, its export sales account for only a fraction of its domestic market, reducing the risk of potential backlash.

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

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

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

Chery did not respond to calls and email requests for comment.

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

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

Russian vehicle sales have fluctuated wildly over the past decade, plummeting 36 percent in 2015 after the country was sanctioned for Moscow’s annexation of Crimea. Volume has not recovered to the peak of around 2.9 million in 2008 and 2012, according to the Association for European Businesses. The Russian new car market was less than 5 percent the size of China’s last year.

There’s a reason Great Wall is the only one of the top three Chinese automakers in Russia to set up a manufacturing base there, said Temur Umarov, a grantee from the Carnegie Endowment for International Peace.

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“Russia is a volatile place to work and nobody 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 looming and people’s purchasing power is very low.”

Bloomberg

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