“Economy from above” is a collaboration between WirtschaftsWoche and LiveEO. This is a translation of the original article written in German by “Maxim Kireev“. Access the original article here.
When Andrei W. hears the word sanctions, a mischievous grin crosses the Russian’s face. For about five years, he says, he has been earning his money by importing used cars. But it has never been as good as it is now. Andrej W. used to buy used U.S. cars at insurance auctions directly in the United States. He was able to ship four to five of them to Russia every month. He earned up to 1000 euros per car. A good living by Russian standards. “Since Europe stopped supplying new cars and the Russian factories came to a standstill, business has literally exploded,” reports the dealer.
Although business with the U.S. is over because hardly any ships from overseas enter Russia, it’s all the better with the EU. He currently buys 40 to 50 used ships a month – mostly somewhere in Germany – and has them shipped to Russia.
Many of the cars that dealer Andrei W. imports end up in huge car markets such as the one in the northeast of St. Petersburg. Just a few years ago, car owners and professional dealers there offered used cars that had once either been imported to Russia as new cars or assembled in one of the numerous Russian locations of international manufacturers. This has changed completely within a few months – in a direction that certainly no one would have thought imaginable last year. Exclusive satellite images from LiveEO show: The huge parking lot of the St. Petersburg car market is now filled primarily with freshly imported cars from Europe that already have a few years under their belt.
Car Market Saint Petersburg, Russia
07/17/2021 (left image): One of the largest car markets is located in the north of Russia’s second largest city. On a huge parking lot between prefabricated buildings and car dealerships, private individuals and dealers offer their cars.
21.07.2022 (right image): Despite sanctions, the bazaar in mid-July was anything but empty. Meanwhile, numerous used cars from all over Europe are offered there, which private dealers have imported.
“I spend half the day on the web looking for cars. Mercedes, Porsche, Volkswagen: everything is there. And the rest of the time I look for Lithuanian car transporters and drivers to bring the vehicles from Germany to Russia.” Up to a purchase price of 50,000 euros, the import is completely legal. Anything above that is paid for from an account in Georgia or China. “In grossly simplified terms, the cars are then officially on their way to another country, but remain in Russia.” In any case, he has not yet experienced any problems at EU customs, says Andrej W.
Direct import of used cars from abroad was hardly worthwhile before Putin’s Ukraine war, because Russia sealed off its market – with draconian import duties of up to 48 percent of the purchase price. For older models, customs demanded two to three euros per cubic centimeter upon import, depending on the engine capacity, which equates to up to 6,000 euros for an engine capacity of two liters. A new car from Russian production was usually cheaper. These times are over. Because Russian-made vehicles are simply no longer available, Russian car buyers are prepared to dig deeper into their pockets – they have no other choice.
As a result, the car market in St. Petersburg is not an isolated case. A similar picture can be seen on the Moscow car market in the northeast of the Russian capital: where just a short time ago there were plenty of new cars from Toyota and other Asian and European brands waiting for buyers, used cars now also dominate.
Business is particularly good in Vladivostok. Seljony Ugol, or “Green Corner” in German, is known as a transshipment center far beyond the city limits. The city is famous in Russia for the largest car bazaar in Russia. Every month, thousands of used cars from Japan find new Russian owners there.
Dmitrij Sabora has been in the business for over 15 years and runs the Carwin company in the Russian city on the Pacific. His specialty: buying masses of right-hand drive cars at auctions in Japan and having them shipped to Russia. “Before the war, we had maybe 80 to 90 orders for Japanese cars; in June, we had 300,” the car dealer reports. For him, the reasons are obvious: “The strong ruble offsets the cost of customs clearance, and since there are hardly any new cars left to buy, people have little alternative.”
In fact, Western car companies that used to import new cars or even produce them in Russia have largely turned their backs on Russia. On the one hand, because some suppliers have withdrawn from Russia due to sanctions. Another reason is that the European Union has banned the export of expensive cars with a purchase price of 50,000 euros or more to Russia.
Satellite images show a port terminal near St. Petersburg, for example, where thousands of cars per month used to be loaded from ships onto car transporters. In the meantime, the huge site is empty:
The parking lot at the customs terminal in the north of the city, also an important transshipment point for new cars, is also almost empty:
The pictures of the former production sites are also dreary. The French carmaker Renault, which until recently still had its own plant in Moscow, was the first carmaker to withdraw completely from Russia. The parking lot for finished vehicles now resembles an asphalt desert. The future of other manufacturers in Russia is also uncertain. Volkswagen, for example, has shut down production in Kaluga for the time being due to a lack of components from Europe. Russian business media also recently reported, with reference to anonymous sources, that the Wolfsburg company is looking for a buyer for its site in Kaluga, Russia.
The only ray of hope for the Russian new car industry so far remains the plant of the Chinese manufacturer Haval, which started production a few years ago in an industrial area near Tula, south of Moscow. Unlike Europe or Japan, China has not participated in the sanctions against Russia.
Accordingly, production continues to run smoothly while new cars wait in a parking lot at the factory site to be picked up for delivery to the dealer. In the meantime, the share of Chinese brands in new registrations in Russia has risen from under five to almost 25 percent. However, overall sales in July were nearly 80 percent below last year’s level.