Russia's Automotive Market: A Complex Dilemma for Foreign OEMs

Russia found itself facing condemnation from other European nations and the US, and the EU and US soon imposed sanctions. Original equipment manufacturers (OEMs) from Europe, the US, Japan and South Korea quickly faced an environment in which continuing vehicle manufacturing or sales in Russia became difficult.

Even without sanctions, the negative publicity from maintaining ‘business as usual’ would have severely damaged the reputations of foreign OEMs still operating in Russia. One by one, foreign OEMs made press announcements that they would either simply cease operating in the country or divest their Russian assets.

Renault Group found itself with the most to lose. In 2008, the company acquired a 25% stake in AvtoVAZ, the Russian state car manufacturing champion, for $1.17 billion. In 2014, it increased this stake and took full (notional) control of the business.

However, Renault announced in May 2022 that it had sold all its Russian assets, including an Avtoframos plant in south Moscow, for one ruble—for a business it valued at €2.195 billion at the end of 2021. The deal included a six-year time frame in which Renault could buy back its stake if relations between Europe and Russia improved. However, as recently as February of this year, AvtoVAZ said that Renault would have to pay $1.3 billion to repurchase its previous stake.

This is the backdrop against which any OEM thinking of returning to Russia must consider. Since the mass exodus in 2022, the market has recovered in a relatively robust fashion, both in terms of sales and production. There has been some sales volatility in 2025, but it is yet to be indicative of a long-term decline.  

Many Chinese OEMs and brands have moved in to fill the void left by European automakers as well as companies like Hyundai/Kia, supplying vehicles either through imports or via local assembly from semi-knocked down kits.

At the same time, AvtoVAZ has resumed production with a simplified line-up, beginning with a stripped-down version of its best-selling entry-level model, the Granta. Initially, production resumed without features previously considered standard—such as airbags and anti-lock brakes—due to severe supply chain disruptions following Renault’s exit.

Nonetheless, these pared-down models have allowed AvtoVAZ to meet domestic demand and retain its market-leading position in Russia—largely independent of Renault’s supply chain and technology.

The withdrawal of European, Japanese and Korean manufacturers—following GM’s earlier exit and Ford’s scaled-down LCV operations—left a major gap in vehicle offerings familiar to many Russian consumers. Chinese OEMs have stepped in with strong SUV-C and SUV-D options, but significant pent-up demand remains for models from departed OEMs. Many consumers are delaying purchases, hoping for a return-to-market normalcy.

Toyota has denied officially reentering the Russian automotive market after appearing among the top-selling brands in recent months. In April, it ranked 10th in passenger car sales in Russia with 1,600 units—despite having no official presence.

These vehicles are reportedly unofficial parallel imports—meaning they arrive without official approval from the parent companies—by Toyota’s former dealer group and other parties.

Japanese and Korean OEMs have maintained a presence in the country to meet servicing and warranty obligations. However, all Toyota, Mazda, and Hyundai/Kia vehicles now enter the market as parallel imports often routed through Central Asia or China.

Recently, Mazda’s former official dealer reportedly resumed CX-5 and CX-50 deliveries to Russia through its own parallel import channels. Parallel imports, however, are more expensive than previous official routes due to added markups from intermediaries. 

These shifts in distribution provide valuable automotive industry insights into how informal channels and brand loyalty sustain demand even amid geopolitical disruption.