Post by : Badri Ariffin

Russia’s struggling auto market showed a sudden spike in new car sales in October, but analysts warn that the relief is temporary. Buyers rushed to beat rising fees and taxes, leaving the market bracing for another downturn in early 2026.

Once one of Europe’s fastest-growing markets, Russia’s car sector has faced years of turmoil since the 2022 invasion of Ukraine. Western manufacturers exited, interest rates climbed, and the wider economy slowed, cutting consumers’ ability to spend on big-ticket items like cars.

The short-term surge in sales is linked to a looming scrappage fee increase. From December 1, fees for powerful, imported cars will rise sharply, while January 1 brings a 10% hike for all vehicles, pushing prices higher across the board. The fee, intended to favor domestic brands, effectively acts as a protectionist measure, giving Russian manufacturers like Avtovaz an advantage over imported models.

In October alone, sales jumped 35% from September to 165,702 units, yet remain 3.2% below last year’s level. Average new car prices hit a record 3.43 million roubles ($42,189), reflecting both the fee impact and inflationary pressures.

Chinese brands have emerged as major beneficiaries, selling nearly 1 million cars in 2024, while total sales for the year are projected to reach around 1.3 million units—well below pre-war forecasts of 4 million. Analysts expect the first months of 2026 to see weaker demand as buyers who rushed purchases in October have already stocked up.

Additional pressures are on the horizon. A planned increase in Russia’s value-added tax from 20% to 22% next year could further raise car costs, leaving consumers facing tough decisions in a market already under strain.

Many buyers are choosing to pay higher prices now rather than wait. “If I had delayed, my car would have cost 7.2 million roubles instead of 6.5 million,” said one purchaser of a luxury vehicle, highlighting how anticipated hikes are shaping consumer behavior.

The Russian auto market remains caught between structural challenges and policy-driven price jumps, with short-term boosts masking a deeper, ongoing crisis in car sales and affordability.

#Business News #Economic