Researchers say that when consumers resort to buying Ladas, that’s a bad sign for the wider economy, even if they’re Russian
After it invaded Ukraine, almost every foreign brand in the United States’ circle of influence pulled out of Russia. Now, monthly auto sales are down to about a quarter of what they were pre-war, and they are being pointed to as a sign of just how beleaguered the wider economy has become.
Before it invaded Ukraine, Russians bought about 100,000 vehicles per month. As a result of reduced supply and other factors, that figure is now down to about 25,000 sales per month.
“Russians are just buying less cars, period,” Steven Tian, a Yale researcher who is studying the nation’s economy, told Business Insider. “That speaks to the weakness of the consumer in Russia. This is as close to a proxy to deteriorating consumer sentiment as there is, and the story it tells is profoundly distressing. Russians just aren’t spending money.”
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One of the reasons for the rapidly falling sales is the embargo imposed by the U.S. and its allies in Europe, Korea, and Japan. Although Russia did have a bit of a domestic industry before the war, its consumers preferred vehicles made by foreign automakers.
“It’s not only that sales have plummeted, but it’s that sales of foreign brands were just so high before the war,” said Tian. “If you go around Moscow and St. Petersburg, you find that elite Russians only drive the car brands we recognize, like Porsche, Jaguar, Hyundai, and so forth. The only Russians driving Ladas were those with less disposable income.”
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However, more Russians are now turning to Lada or Chinese brands like Geely. The latter has seen its sales increase by 88 percent year-over-year, but that’s not making up for what was lost following the invasion.
Indeed, Tian suggests that the availability of foreign vehicles (and other consumer goods) is just one piece of the economic puzzle. In addition to supply, Russians are also struggling with soaring prices and deteriorating consumer sentiment, negatively impacting the wider economy.