Results of the Russian Auto Industry in 2022 and forecast for 2023

Development of the motor vehicle market and automobile production in Russia seems expedient to be considered in the context of the current situation on the global automobile market and the existing trends in the world automotive industry.

Global automobile market

The rise of the global auto market that began to take shape in May 2022 proved in fact nondurable. Due to enhanced malfunction, the world market turned out to be continuously depressed starting from September up to the year end. According to the OICA statistics, total global sales of motor vehicles in 2022 amounted to 81.6 million units, down 1.4% year-on-year, or down 10.5% as compared to 2019, or down 15% as compared to the record global sales in 2017.

The picture of vehicle sales over the world in 2022 looks like a dissimilar mixture where positive results of the biggest market in China (up 2.1%) compensate dull sales in Europe (down 5.9%) and North America (down 6.8%) determined by a problem state of economies and uncertainty of their further development. High performances are shown by markets of South-East Asian countries. A bright spot on the region’s map is India that has overtaken Japan in terms of vehicle sales in 2022 to become the third biggest automobile market in the world. The most abrupt fall caused by the well-known geopolitical circumstances has been faced by the Russian auto market that shrank within a year by 53.6% to 808.6 thousand sales. Consequently, in the global ranking of national automobile markets Russia stepped down from the ninth position in 2021 (following China, USA, Japan, India, Germany, France, Brazil and UK) to the 18th place positioned behind Turkey and ahead of Saudi Arabia.

Estimating the outlook for 2003, the GlobalData analysts note that the global automobile market will remain dependent on limited supply of semiconductors. Despite early signs of meeting the pent-up demand for cars, a significant shortage of supply will be probably felt until the middle of 2023. Should the supply deficit gradually slacken, there could be macroeconomic factors coming to the fore and hindering the demand. The global automobile market in 2023 is forecasted by the analysts to reach about 86 million vehicles, up 6% to the 2022 level.
World motor vehicle production

In accordance with the OICA statistics being compiled with participation of the OAR specialists, world production of motor vehicles of all types grew by 6% to 85 million units in 2022, which however lags behind the 2019 level (92.1 million) by 4%. When collated with a 1.4% decrease of new registrations, the growth of production in 2022 may indicate that vehicle manufacturers were seeking to boost inventories after notable devastation of stock during 2020 and 2021, first because of the pandemic crisis, and then due to the semiconductor supply crisis.

Totally, out of 85 million vehicles produced in 2022 all over the world, 50 million vehicles were made on the Asian continent, which accounts for nearly 60% of the world production. The highest growth rate (up 10%) has been noted in North America, which was particularly stipulated by re-dislocation of manufacturing facilities in line with the policy of repatriation of the auto industry to the US territory.

In Europe, the volume of automobile production has decreased by 1%. While the vehicle output grew 5% in the European Union, it dropped by 25% in East Europe (including CIS and Turkey), mainly due to a sharp fall by 61% in Russia. As a result, in the world ranking of automobile manufacturing countries Russia moved from the 11th position in 2021 to the 22nd position, between Malaysia and South Africa in 2022. Good results among the member states of the Euro-Asian Economic Union were shown by Uzbekistan and Kazakhstan with automobile production grown by 38% and 22% respectively.

We could expect growth of world automobile production in 2023 proportionally to the forecasted dynamics of the global market development, up 6% year-on-year, to total 90 million vehicles.
Development of the Russian automobile market and production

After rather successful completion of 2021 when the market has reached positive results with total growth of all-type vehicle sales to 1.74 million units, up 6.8% year-on-year, the next year started with an upward trend of sales. However, aggravation of the international situation in February 2022 in connection with the Ukrainian crisis and imposing Western sanctions against Russia have led to a radical change of the Russian automobile market.

The market growth noted during the first two months of 2022 has transformed into a total fall by 37.8% in March and by 21.5% in the first quarter. The further development of the market took place on the background of new players entering Russia, thus partly compensating the mass “exodus” of Western companies.

Beginning from the second quarter, the falling rate of the automobile market stabilized on the level of down 53.6% year-on-year, and 2022 ended with the total sales result of 808.6 thousand vehicles. The biggest drop of sales was suffered by the passenger car sector (down 57.5%). The least drop was noted in the sector of buses and coaches, not so much depending on foreign components (down 13.3%). A drop of sales on the LCV and HCV markets was down 45.2% and 15.5% respectively.

The share of manufacturers – OAR members on the Russian market (by number of vehicle sales in 2022) remained totally on the previous level of 54.2%, while in particular it was 49.9% for passenger cars, 82.5% for light commercial vehicles, 55.3% for heavy trucks, and 75.7% for buses.

Along with a positive effect of import liberalization and attraction of investors from friendly countries, a fall of the market was mainly held in check thanks to great efforts of the domestic automobile manufacturers for the sake of meeting the market demand in conditions of critical shortage of components. The total fall of production that started in the second quarter of 2022 was reflecting in fact dynamics of the market, and the year ended with a result of 608.5 thousand vehicles produced, down 61.2% as compared to 2021.

Of the total quantity of motor vehicles manufactured in Russia in 2022, 77% were produced by OAR member companies. The share of OAR members was 96% in truck output (including light trucks), 72% in car output, and 75.5% in bus output (including minibuses).

The year 2023 began with encouraging performance of the automobile market. The total sales falling rate (-53.6%) being the annual result of 2022 slowed down to (-30%) in the first quarter of 2023. In particular, the drop of sales of trucks and buses switched for sales growth, by 21.6% and 8.9% respectively. Further on, we can expect transition to positive sales dynamics for all types of motor vehicles, resulting in a cumulative growth rate of the market in 2023, as per basic scenario, by 25% to 1 million vehicles, slightly behind the target stipulated in the Strategy of Russia’s automotive industry development through 2035.

The currently available data on production of motor vehicles in Russia for the first two months of 2023 are not yet sufficient for a well-grounded assessment of its development trend. As opposed to slowing down of the drop of sales, the total production decrease rate accelerated from (-61.2%) as a result of 2022 to

(-67.5%) shown in January-February 2023. The real annual result will depend on effectiveness of governmental measures for support of the industry in whole and the automotive industry in particular. Nevertheless, we have every reason to believe that the target of providing production of 626 thousand vehicles in 2023 (up 7% vs. 2022), as stipulated in the Strategy, can be successfully achieved.

Yuri Kravtsov, OAR