Chinese models look to motor in to local car market

Chinese cars could become bestsellers in Russia in 3 years, providing strong competition to the local car producers.

This comes after leading brands, like Great Wall, launched local production, ahead of starting sales to Western Europe this year.

When Chinese cars flooded the Russian market in 2008, Vladimir Putin slapped an import tax of $7,000 a vehicle, almost doubling their cost. That wiped out their dealers, which competed with Avtovaz on its key selling point – price.

But on Friday top Chinese manufacturers started production in Southern Russia, bypassing duties and slashing costs. The sight Russian carmakers fear is Chinese dealerships selling models of better quality and cheaper than Avtovaz can offer.

Andrey Reznikov, Director at IRITO, Russia’s main Chinese car distributor, says that by passing those savings on to consumers, Great Wall SUVs will go from nowhere to becoming the best-selling foreign automaker in the sector as early as 2013.

“Practically last year we had no sales because of the new import tax. So, local production was the only situation which could let us restart sales. This year we expect we will sell 5-6,000 Great Wall SUVs. Great Wall has been number one on the Chinese market for more than 10 years in SUVs and pickup segments, and for us it’s a good idea to repeat this situation in Russia, at least for foreign brands.”

However, experts warn Moscow won’t let them get too big, with BrokerCreditService analyst, Sevastyan Kozitsyn, also saying Russia’s Government will protect local producers in the event of a real threat.

“Chinese carmakers have proved to be extremely fast learners. Within 2 years we can expect them to be as good as the Koreans. But if they start taking too many sales from Avtovaz, Russia’s government will find a way to stop them.”

Russia’s being used as a launchpad to bigger markets, with BYD and Geely expected to be the first Chinese carmakers to start sales in Western Europe later this year.