How the Russian automotive sector was driven off a cliff

2024 was a good year for Russian car sales, with 1.57 million new cars sold; a 48.4% increase over 2023 [1]. Truck sales also saw good results, with 126,000 trucks sold, despite this being 12% lower than in 2023 [2]. LCV sales also grew by 24.4%, to 112,000 [3]. It seems, however, that this figure may have peaked, with sales predicted to fall and, starting in late 2024, the entire industry entered a period of prolonged decline. The first indicator of this was KamAZ which, in August 2024, warned of truck sales dropping by 15-22% at the end of the year [4]. After those warnings came further ones regarding LCVs and cars. In Q1 2025, the sector showed evidence that it was in serious trouble.

The causes

When it comes to truck sales, their staggering decrease is linked to both the price of road transportation in Russia and high interest rates. In Q1 2025, the price of road freight dropped by 12%, compared to respective prices at the end of 2024 [5]. Over the winter of 2024-2025, 30% of Russian truck operators were forced to close down their business [6]. There was also a significant wave of returns of newly bought vehicles either bought using financing or leased, which led to dealerships and leasers building up an inventory of 60,000 to 65,000 trucks [7]. Alongside the drop in demand for trucks, this figure may even cover most of the purchases for the remainder of the 2025. The Russian military is partially stimulating the current levels of demand: but this only impacts the Ural truck, where the military has pre-purchased the entirety of production volume. When it comes to Kamaz, the military can only afford to procure 30% of the plant’s production.

When it came to LCVs, the contraction witnessed was due to similar factors, as well as reduced military procurement, notably for the UAZ factory. Also in the mix is the stagnation of the ticket prices in Russia for public transport. Whilst these have gone up only from the 30-35 rubles’ range to the 40-50 rubles’ range regionally, the prices for minivans operated on many routes have doubled over the last 3 years. A GAZ Gazelle now costs 3 million rubles, up from 1.5 million rubles previously.

For new cars, the reasons for the contraction are mostly self-inflicted. The first reason is that from October 2024 there was a new recycling fee introduced for imported cars. This was then further raised on January 1st 2025 and now stands at over 5,000 euros per vehicle. This was done at the behest of AvtoVAZ, which feared it was going to be severely impacted by Chinese cars and wanted to retain its advantage in the 1 to 2 million ruble price range. This move, however, essentially killed the Russian new car market. The second reason for the decrease in new car sales was the introduction of macroprudential measures by the Central Bank on car loans. It is now less profitable for Russian banks to lend money to people who have a debt burden of monthly payments over 50% of their official income. For loans to such people, the banks have to set up additional reserves: but these make up 61% of the recipients of car loans in Russia [8]. The new strategy by banks like VTB is to focus more on giving loans to customers that have little to no debt, but this is unlikely to make up for the prior volume. The final measure that is causing the new car market to contract rather violently is the requirements for certain categories of cars to be domestically produced. These are valid for state orders but also for taxis from this year, which is something that the taxi sector is warning will devastate them. In the Russian Far East for example, most taxi drivers are individual entrepreneurs and not companies with big fleets and they can’t switch to new domestic cars as the law requires from October 2025. Even the big fleet operators aren’t thrilled by this as their experience operating Ladas as taxis isn’t great. There aren’t enough spare parts, the car breaks down a lot more than Korean brands even when new, and the downtime can be as large as 30% of the time [9]. Overall, the estimate is that operating a Lada as a taxi is at least twice more expensive than operating a Korean car right now.

If in the main automotive sectors there was a crisis, in the niche sectors it’s a bloodbath. The Russian Ministry of Agriculture, along with the Russian Ministry of Industry and Trade, introduced astronomical recycling fees on imported agricultural machinery. On top of this, Russian farmers have had poor weather the last few years that has damaged their harvest. Manual labor, that which is part of the process of collecting the harvest, has dried up, with the persecution of migrant workers and overall profitability in the sector has contributed to a drastic contraction. As a result, 40% of the domestically produced agricultural equipment in 2024 went unsold and in Q1 2025 this saw another drop in sales, by 32.9% [10]. State support for the purchases of domestic equipment is also lacking. Even if farmers get this support, it only covers several percent and lasts only for the first year of their financing agreement. Belarus has exploited this by offering financing that has a greater amount of a subsidized rate for the entire duration of the contract. This has resulted in the market share for their equipment to more than double on the Russian market, far above what is typically expected. Also another issue is that the quality of Russian agricultural equipment in some cases is lacking; thus, the Ministry of Agriculture went against its own regulations by introducing a quota for imported vehicles without charging the recycling fee. Another struggling sector is the bus sector, where overall sales are down while the money Russia as a whole and the regions have to improve public transport has been cut. Similarly, the decrease in the spending on infrastructure has delivered severe blows to the sales figures of road building equipment.

The state of the market

Across the board, things look grim if we look at percentages. New car sales dropped 25.3% in Q1 2025, while domestic production grew by 7.1% [11]. The dealership inventory, due to this imbalance, stands at over 700,000 units [12]. As with trucks, they can stop building and importing cars for the remainder of the year. LCV sales were down 17% while domestic production was down 32.1% in Q1 2025 [13]. Bus sales were down 63% whilst domestic production for buses over 5 tons decreased 41% and for buses under 5 tons the drop was 17.1% [14]. Domestic truck production dropped 15.6% whilst total sales fell 44% [15]. Niche equipment, as we said, also showed a steep decline, but the issue there is that, for this sector, this is the second year in a row of contracted sales figures.

AvtoVAZ has seen its Q1 2025 sales drop by 16.8% to 76,200 units compared to Q1 2024 with the April 2025 sales dropping a further 32,6% [16]. The other problem is that the production of Ladas sped up whilst its sales decreased, leading to the company having over 100,000 cars in dealership warehouses by Q1 2025. AvtoVAZ is typically used to there being only around 60,000 cars in its warehouses. The company is also not particularly candid when it comes to its financial results and is known to hold 120 billion rubles in high interest debt.

At Moskvich, sales dropped by 55% in Q1 2025 against the same period in 2024. The drop was mainly because Q1 2024 saw legal entities purchase 3,500 cars from them versus only 800 in Q1 2025 [17 ]. Also, the brand is now considered to have a higher degree of domestic components, though Russian car journalists joke that the only thing Russian in the modern Moskvich is the Kyrgyz migrant worker assembling it in a plant in Moscow.

Solaris, which is made up of the old Hyundai plant in St Petersburg that assembled Kias and Hyundais, continues to operate around 10% of its 230,000 cars per year capacity. It was estimated that enough kits for the 70,000 cars were left there at the point it was sold. In 2024, they built only 21,972 cars, despite claims by the new owners that they would build 200 cars a day[18]. They sold a bit less at 19,243 cars for 2024.

UAZ took a big hit in January when it came to sales, reporting a 60% drop but for Q1 2025 the decrease was only 34% [19]. The plant has also been searching for around 800 workers for over a year now and plans to increase salaries by another 10%, despite falling sales [20]. They also want to reduce the number of engines and models they have on offer. This may mean the end of the iconic Bukhanka if they close down the metal body workshop. The vehicle is primarily bought by the army, not because of the quality but because it has a low price of 1.5 million when new . Overall, the company intends to move towards being primarily an assembly plant putting together Chinese parts and focusing on SUVs, rather than LCVs. It is yet to be seen if these plans will still be adopted that sales are falling so drastically.

GAZ’s sales of its Gazon Next truck fell 21.5% in Q1 2025 compared to Q1 2024. Its LCV sales dropped 35% to 8,554 units, but it retained a 45% market share in Q1 2025 [21]. The company also plans to reduce its engine production, which is substantial as it owns 94.54% of YAMZ and 79.94% of YAZDA [22].

KAMAZ saw a significant drop starting in H2 2024, which brought its net profit from 20.5 billion rubles in 2023 to 731 million rubles in 2024. In 2024, it sold 33% fewer vehicles than in 2023 and lost its spot as the most sold truck brand on the Russian market [23]. As a consequence, the market share of the company fell from 20.5% to 17%. In August 2024, the company warned that it expected sales to drop a further 12-22% till the end of 2024. More worryingly for the company, its debt grew from 143.9 billion rubles in 2023 to 225.6 billion rubles in 2024; the most expensive short term debt more than doubled from 38.8 billion rubles to 86.8 billion rubles. This led to Q1 ending with a 12.46 billion ruble loss. Further losses and ballooning debt costs are expected for the rest of the year[24].

Ural remained steady only due to a big defense order, an order it is struggling to fulfill. The company is expected to build 1,200 trucks for the Russian Military per month, but the staffing levels are making it hard to reach this goal[25].

There are also plans to restart full scale production at the former Volkswagen plant in Kaluga, with initial production goals of 100,000 units a year. Yet, as was seen with the Kia plant, this may prove to be overly optimistic.

The former Citroen plant in Russia has more modest goals of producing 25,000 cars a year using Chinese kits adapted for the Chinese market and Citroen crossovers.

The final semi-domestic brand is Haval, which is unique among Chinese brands as part of its car assembly is in Russia itself. Haval aims to expand the production of engines and assemble even more cars within Russia. It plans to raise the Tula plant’s assembly capacity from 150,000 a year to 200,000. Actual production for 2024 was, however, below the 150,000 target, at 136,400 [26].

Foreign competition

Russian domestic production of cars and trucks does not account for more than a 50% share in the market. The top ten car brands in terms of new sales include 4 Chinese companies and one Russian. Chinese brands see Russia as a short term market and are focusing only on dealerships and marketing for their vehicles. Even in the motorbikes’ sector, the leading company, that produces under the brand ‘Regulmoto’, closed down its Russian plant rather than expand its production. This company now focuses on selling mostly cheap bikes in the 125 -250,000 ruble range [27]. In the truck sector, the big news was the ban of the sales of the Chinese SX3258 model made by Shacman. which reportedly doesn’t meet the regulations for trucks in Russia. The company is now left with 13,000 vehicles of the same type which sit idle in Russia and which will correspond to a loss for the company of 115 billion rubles [28]. However, this should also be seen as a form of protectionism by the Russian Prosecutor General’s Office, as all the shortcomings of the truck were identified when it was approved for import by the Russian government. The company is now considering opening a factory in Russia as a means to solve the issues with its truck sales in the country.

The Belarusian MAZ, which benefited from the rise in truck sales in 2023 and H1 2024, is also seeing a decrease in its sales [29]. In 2023, their sales grew by an astounding 70% and, in 2024, sales were down only 10.7% [30]. For Q1 2025, their sales were down by a bit less than the other brands. In April 2025, they were in third place when it came to truck sales in Russia. Again, this serves as an example of how entities from Belarus can successfully out-compete Russian brands in their native market.

The projections

Russian new car sales are expected to fall, with projected sales figures between 800,000 and 1 million units for 2025. Even if sales reach beyond 1 million, this would mean Russian domestic producers would have to cut production considerably or they will be forced to build up an even larger and more expensive inventory. There are already over 600,000 cars in dealerships and by May, despite the drop in imports, these might have reached 700,000. This is more than enough to cover the demand for the remainder of the year. It is also expected that 10 Chinese brands will exit the Russian market in 2025 and that dealerships for Chinese brands will decrease by double digit percentages. New cars themselves are expected to go up in price by 15% over 2025, further reducing demand. As mentioned earlier, when it comes to trucks, the year started with a surplus of 60,000 – 65,000 trucks in dealerships. Again, this is enough to cover the demand for a year with the decrease in sales. When it comes to domestic agricultural equipment production, the situation is even worse, with Rostselmash announcing that its annual vacation at their factory will start in June instead of the usual time in August. There are discussions in the Russian government about a new family preferential loan for the purchase of cars, but it seems that this will only be a band-aid for the new car market and is unlikely to revive it. The other vehicle types need a much more substantial form of subsidy to make it through the year as they are taking on ever growing losses and borrowing at much higher rates. The industry isn’t heading for a cliff anymore: it’s in free fall.

[1] https://www.autostat.ru/news/59225/

[2] https://igrader.ru/cargo/itogi-gruzovogo-rynka-rossii-za-2024-god/

[3] https://www.autostat.ru/press-releases/59235/

[4] https://www.business-gazeta.ru/news/643773

[5] https://www.kommersant.ru/doc/7657382

[6] https://iz.ru/1864218/vladimir-gavrilov/ot-vorot-v-razvorot-s-rynka-rf-ushel-kazhdyj-pyatyj-gruzoperevozchik

[7] https://www.kommersant.ru/doc/7622657

[8] https://www.cbr.ru/press/pr/?file=638497333636376853FINSTAB.htm

[9] https://www.ixbt.com/news/2025/03/03/next-lada-vesta.html?ysclid=m8yatmgimj170766121

[10] https://www.kommersant.ru/doc/7674873

[11] https://tarantas.news/posts/id56797-teper-eto-uzhe-ne-sekret-skolko-legkovyh-mashin-vypustili-rossijskie-zavody-po-itogam-pervogo-kvartala

[12] https://auto.ru/mag/article/na-skladah-dilerov-skopilos-okolo-700-tysyach-avtomobiley-eto-rekord/?utm_referrer=https%3A%2F%2Fauto.ru%2Fmag%2Farticle%2Fna-skladah-dilerov-skopilos-okolo-700-tysyach-avtomobiley-eto-rekord%2F