Due To Ukraine Sanctions, Russian Sales Fell By 79 Percent In April.

Due to Ukraine sanctions, Russian sales fell by 79 percent in April.

In April, Russian automobile sales fell by a historic 79 percent as sanctions hit domestic production and most foreign automakers shut down operations.

New-car sales in Russia hit an all-time low last month as sanctions impeded domestic production and most foreign automakers shut down operations in the aftermath of President Vladimir Putin's invasion of Ukraine.

According to the Association of European Businesses (AEB), which released a statement on Wednesday, sales fell by 79 percent in April to 32,706 vehicles.

This is the biggest drop since the European trade association started publishing data in 2006. The April data did not include BMW, Mercedes-Benz, or General Motors, which report sales quarterly.

Sales of Lada autos built by Russia's largest automaker, AvtoVAZ, have dropped by 78 percent, according to AEB data.

The depth of the shrinkage, according to Promsvyazbank specialists, was greater than in April 2020, when sales were halted according to COVID-19 laws.

"A shortage of cars at warehouses, rising costs, and prohibitive rates on car loans may all be justified," Promsvyazbank said.

Sanctions imposed over the Ukraine conflict have hampered the domestic auto industry, with parts supplies drying up and forced shutdowns.

Almost every international automaker with a plant in Russia, including Volkswagen Group, Ford Motor Company, and Mazda, has halted operations, while others have stopped importing vehicles.

The slump exemplifies the severe economic consequences of the Ukraine conflict, as Russia may experience its biggest downturn in nearly three decades this year.

After a 4.3 percent growth in 2021, new automobile sales are anticipated to drop by at least 50% this year, according to the AEB.

Due to a drop in real earnings, demand is unlikely to recover, making the automobile industry the most damaged industrial sector, according to VTB Capital analysts.

In late February, Russia's central bank boosted its benchmark rate to 20% in an emergency action aimed at managing financial risks, just days after the country launched "a special military operation" in Ukraine. The rate has since been reduced to 14 percent.

"Due to high expenses, parallel imports will not help meaningfully cut the deficit," VTB Capital warned.

Last week, Moscow released a list of goods from foreign automakers, technology firms, and consumer brands that the government has included in a "parallel imports" plan meant to protecting consumers from Western business isolation.

Car manufacture is strongly reliant on imports, with a recent analysis from Moscow's Higher School of Economics indicating that imports account for more than half of the value created in the industry.

Because of the industry's use of just-in-time inventory management, the impact of fines was seen practically immediately.

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Sources:

Automotive News Europe. 2022. Russian sales plunged 79% in April amid Ukraine sanctions. [online] Available at: <https://europe.autonews.com/sales-market/russian-car-sales-plunged-79-april-amid-ukraine-sanctions?adobe_mc=MCMID%3D73386772027098707190933920491850620535%7CMCORGID%3D138FFF2554E6E7220A4C98C6%2540AdobeOrg%7CTS%3D1652377337> [Accessed 12 May 2022].