Russian new-car sales plummet 84% in May as isolation hits once-hot industry

Russian new-car sales plunged 84 percent in May, as sanctions and international isolation brought an industry that had once been a showcase for foreign investment to a near standstill.

Fewer than 25,000 vehicles were sold last month, the Association of European Businesses (AEB) said in a statement on Monday, the lowest level since at least 2006 and less than a tenth of the monthly levels seen in peak months in the past.

President Vladimir Putin’s Feb. 24 invasion of Ukraine spurred a wave of sanctions from the U.S. and its allies, as well as disruptions of supplies from a broader range of countries.

The isolation hit the foreign-dominated auto sector especially hard, with the exodus of overseas producers worsened by the industry’s heavy dependence on imported components.

“A few suppliers still have not sold out all their stocks, so that is what is selling,” said Azat Timerkhanov of consultant Avtostat. “But they are running out rapidly.”

Only two of Russia’s more than 20 auto factories are operating now, a locally owned one and a Chinese plant, he said. European and most Asian producers suspended shipments of cars, while even companies from countries that did not join the sanctions were faced with logistics problems.

“There is a search underway for alternative suppliers -- usually Chinese,” he said, but there is no certainty yet that it will succeed.

The Russian government has taken over some major plants from foreign companies that left, including the former Moskvich factory in Moscow that was operated by Renault. It has already announced plans to sell stripped-down models without imported safety and emissions technologies.

“Our auto industry relied on foreign components,” said Georgy Ostapkovich, a specialist on the sector at Moscow’s Higher School of Economics. “There were practically no factories that did not work on foreign platforms. Russia was just an assembly line.”

“We are facing primitivization and we will fall behind the rest of the world by a decade,” he said.