By Gleb Stolyarov and Alexander Marrow
(Reuters) – Chinese carmaker Chery has started assembling cars in Russia for sale domestically, at three factories vacated by its Western rivals including Volkswagen and Mercedes, five people familiar with the matter told Reuters.
Chinese automakers have cornered more than half of the Russian auto market in terms of sales since most of their Western counterparts abandoned the country following Moscow’s invasion of Ukraine in February 2022.
Today, they are expanding their reach to also account for a larger share of Russian domestic production, underscoring how Beijing is playing a more influential role in shaping Russia’s manufacturing landscape and economy since the invasion.
In addition to imports of finished cars to Russia, Chery, which accounts for almost a fifth of passenger car sales in Russia, imports nearly finished cars and completes assembly at three Russian factories, the sources said.
Four of those people, including dealers who manage factory relationships, declined to be identified because they are not authorized to speak to the media.
China’s largest auto exporter will likely bank on strong demand at home as Russia’s domestic market struggles with limited production and underutilized production capacity, the sources said.
Chery said in a written statement that it supplies the Russian market with passenger cars, but has no plans to build or buy its own factories there. He did not comment in response to Reuters questions about assembly work at the factories.
Chery’s decision to start production at the three factories and the launch of sales of the models assembled there have not been previously reported.
Russia is raising taxes on imported cars, potentially encouraging foreign automakers to localize their production.
Chery’s global expansion plans call for the company to enter more than 60 new markets over the next three years, Vice President Shawn Xu said in July.
After the European Union’s decision to confirm customs duties on imports of electric vehicles made in China, Chery electric vehicles made in China will be subject to an additional duty.
Chery’s plans to make some models in Russia were approved for meeting safety standards, according to Russian documents dated February to August and reviewed by Reuters.
NEW XCITE MODEL
At factories formerly owned by Volkswagen, Mercedes-Benz and Nissan, Chery’s Tiggo SUV and Exeed models are rolling off production lines, under the supervision of the factories’ new Russian owners, car dealerships and two people familiar with the matter, said told Reuters.
At the St. Petersburg automobile plant, sold by Japan’s Nissan to the Russian state at the end of 2022, the Tiggo 7 is being renamed the Xcite X-Cross 7, one of the sources told Reuters.
A Nissan spokesperson declined to comment.
Xcite won the title of Russia’s “best new brand” at an SUV awards ceremony in late September. The factory, when launching production in January, said it was working with an unnamed “international partner.” It sold 3,447 cars between May and September.
Renaming a Chinese car into Russian reflects the approach taken with the Soviet-era Moskvich, which was relaunched at the former Renault factory in Moscow in 2022.
The Moskvich was a rebranded compact crossover made by Chinese company JAC, sources said at the time, along with JAC equipment on display at the late 2022 launch.
Chery and Russia want to minimize publicity about production in Russia, one of the sources said. China’s cooperation with Russia has already attracted the attention of the West, which seeks to suppress efforts that could help Russia continue its invasion of Ukraine.
The company’s actions in Russia are completely separate from its European expansion plans, a spokesperson at Chery’s European headquarters in Frankfurt told Reuters.
The Russian Ministry of Industry and Trade did not respond to a request for comment.
FINAL ASSEMBLY
In Kaluga, two hours south of Moscow, car dealership AGR Automotive assembles Chery’s Tiggo crossovers in small quantities at a plant with an annual capacity of 225,000 vehicles, three of the five people familiar with the matter said.
AGR did not respond to a request for comment.
Mikhail Pogonov, head of the Chery new car brand at the ASC Group dealership near Moscow, said that Chery models are already assembled in Kaluga, especially Tiggo crossovers, under the supervision of Chery engineers.
In a showroom displaying Tiggo 7 models, he told Reuters he sold 142 Chery cars in September, more than double the October 2023 total.
“Sales growth is already more than 100%,” Pogonov said.
Chery, along with brands it owns like Exeed and Omoda, has almost quadrupled its new car sales to just over 200,000 vehicles in Russia in 2023, compared to 2022, based on data from the Russian analytical agency Autostat. This figure has already been exceeded in 2024, according to Autostat data.
Regional Deputy Governor Vladimir Popov said in August that the Kaluga plant, which sat idle for almost two years while its former owner Volkswagen negotiated an exit deal, would produce 27,000 cars this year.
Volkswagen did not respond to a request for comment.
Chery’s export strategy is known as “semi-knockdown” (SKD), a source said, with Tiggo models arriving at the Kaluga plant almost fully assembled. Chery pays a fee to the factory owners to finalize assembly there.
In Esipovo, Moscow region, another factory produces Chery’s Exeed VX, a mid-size luxury crossover, according to two car dealers. The Kommersant daily was the first to report on Exeed’s production plans at the factory.
The factory, sold by Mercedes-Benz to car dealership Avtodom in April 2023, has an annual capacity of 25,000 places.
Mercedes-Benz said Avtodom has been responsible for plant operations since April 2023. Avtodom declined to comment.
($1 = 0.9117 euros)
(Reporting by Gleb Stolyarov; additional reporting by Alexander Marrow, Reuters TV and Nick Carey; writing by Alexander Marrow; editing by Josephine Mason and Jane Merriman)
