Chinese automaker Chery has begun assembling vehicles in Russia, taking over production in three factories previously operated by Volkswagen, Mercedes, and Nissan. These factories had been vacated following the exodus of Western companies due to Russia’s invasion of Ukraine in 2022. Chery, which already accounts for nearly 20% of Russia’s passenger car market, is importing nearly complete cars and assembling them locally. This shift highlights China’s growing influence in Russia’s economy, particularly as Russia faces underutilized production capacity and weak domestic output.
In factories like St. Petersburg’s former Nissan plant, Chery’s Tiggo 7 SUV has been rebranded as the Xcite X-Cross 7, with production overseen by new Russian owners. Additionally, the Kaluga plant, which once belonged to Volkswagen, is now assembling Chery’s Tiggo models. The rebranded Xcite model won “best new brand” at a Russian SUV awards ceremony in September 2023, marking the successful entry of Chinese vehicles into Russia’s domestic market.
Chery’s “semi knocked down” (SKD) strategy, where nearly finished cars are sent for final assembly in Russian plants, is expected to continue, particularly as Russia raises tariffs on fully imported vehicles to encourage localized production. With Chery’s new models taking the spotlight and Chinese automakers filling the void, the shift represents a key moment in Russia’s changing automotive landscape post-Western sanctions. Chery has ambitious global expansion plans and aims to break into 60 new markets within three years, all while maintaining its growing Russian presence.
THINK LIKE AN ECONOMIST!
Q1. Define the term FDI.
Q2. Explain one reason why Western automakers left the Russian market.
Q3. Analyse how Chery’s entry into Russia might impact the local car manufacturing industry.
Q4. Discuss whether China’s expanding role in Russia’s economy is likely to be sustainable in the long term.
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