China fills void as foreign brands flee Russian market during war

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 in the wake of Russian President Vladimir Putin’s invasion of Ukraine.

The result is upending trade, with Russia seeking to insulate itself from further disruptions by pivoting to goods from countries that haven’t joined sanctions imposed by the U.S. 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 penalties blocked euro and dollar purchases.

“Apart from Chinese cars, there is nothing out there at all,” said Vladimir, a metals industry executive who bought a new Chery Automobile Tiggo SUV in Moscow this month. He declined to give his last name. “Still, there’s a decent amount of choice and, surprisingly, the cars are very good,” he said.

The war has accelerated Russia’s tilt toward Asia, with shifts that had previously taken years happening in months. The transformation draws a line under a process begun near the start of Putin’s more than two-decade rule, with similar changes sweeping the economy from the banking sector to energy sales.

Sales of Great Wall Motor and Geely Automobile Holdings vehicles held steady in July, even as the auto market collapsed by 75% compared to a year earlier, propelling their brands into the ranks of best-selling cars.

Last quarter, 81% of new car imports were Chinese, compared with 28% in the first quarter, according to Avtostat data. The Russian central bank said in an Aug. 24 report that business sentiment in the auto trade turned positive for the first time since the February invasion as the market shifted from European producers to Asian cars.

Samsung dethroned

The smartphone market has also shifted in China’s favor, with Apple and Samsung Electronics suspending shipments.

Xiaomi 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 biggest mobile operator.

“There is a redistribution going on,” said Alexey Zaitsev, the head of e-commerce platform Ozon Holding PLC’s telecommunications division. “We are seeing increased demand for Android smartphones of Chinese brands.”

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

Trade with Beijing was rising even before the war, with China supplying about 25% of Russia’s total imports last year.

Source: Bloomberg

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