China’s Ministry of Commerce Research Paper Suggests Russia’s New Energy Vehicle Market Is A Huge Cooperation Opportunity
China’s Ministry of Commerce has released a research paper that has identified the Russian market as an ideal export and cooperation area in the New-Energy Vehicle sector. This development, given time, will likely open a new front in China-Russia auto industry cooperation. New Energy Vehicles include electric, hydrogen, and other petrol or diesel alternatives. Russia has some of the world’s largest supplies of LNG.
The Russian government has realized the importance of developing an NEV market to replace traditional combustion engine vehicles as extreme climate events such as the floods in Germany this summer become increasingly severe. Russia aims to lower emissions by 30% on 1990 levels by 2030. Eurasian Economic Union (EAEU) nations, which include Russia along with Armenia, Belarus, Kazakhstan, and Kyrgyzstan have also announced a zero-tariff policy for pure electric cars up to end of 2021, creating a buyers’ market.
The Chinese research paper on the Russian NEV market outlined that the sector was still in its early development stage, with only 6,300 NEVs on the road as of 2020, representing just 0.01% of the total Russian market. The related infrastructure needed to power NEVs also faces obstacles, with Moscow, the leading city for electrification, only planning to install 600 charging poles by 2023.
However, the Russian government has significant plans to develop the NEV auto sector. Annual funding of US$1 billion has been earmarked for developing autonomous driving, hybrid, and electric cars.
China could have a role in accelerating development of Russia’s domestic NEV sector. Chinese enterprises have full capacity to provide all-round services to Russia to boost usage and penetration. It is already the world’s the largest NEV market, selling 1.36 million units n 2020, and is also home to the world’s largest new-energy vehicle industry, featuring domestically developed technology and components from batteries to electronics. China boasts a long list of NEV brands with start-ups as well as auto industry veterans that had already embarked on an electrification process. Given these strengths, consumers in Russia will have a wide range of options to pick from among imported Chinese NEVs.
In May this year, China’s NEV exports totaled 20,000 units, out of 150,000 total vehicle exports. During that period, China’s SAIC exported 2,430 units, JAC Motors 549 units, while Tesla’s wholly owned Gigafactory in Shanghai exported 11,527 units, data from industry body CPCA showed.
Cooperation on NEV between China and Russia is one area where government policy compliments trends within consumer markets. This also ties inwith Russia’s need to establish necessary NEV infrastructure and to meet emission reduction targets.
The uniqueness of the Russian market, its high latitude and ultralow temperature, will help Chinese NEV companies to improve their products, including battery technology, which currently tends to have a low performance in the type of cold weather that Russian winters typcially produce.
Increased exports of NEVs from China to Russia will improve the quality of trade and optimize structure of the China-Russia trade, in addition to providing a significant boost to bilateral trade volume and help realize a US$200 billion trade goal set up by leaders of the two countries. China and Russia are also negotiating tariff reductions on products as part of the China-EAEU free trade agreement that was signed in 2018 yet currently remains ineffective. If that deal is confirmed and included reductions in auto industry and NEV component parts then Russian-Chinese cooperation in this sector would reap immediate benefits.
Chinese NEV makers have proved their competitiveness in the European market, there is confidence that their capability will also be validated in Russia.
There is plenty to consider for Chinese NEV manufacturers to consider market entry into the Russian market, while there are opportunities for Russian auto component and NEV manufacturers themselves to enter the Chinese market looking for partners. An NEV partially developed between Chinese and Russian manufacturers would be a welcome development and mutually satisfy both markets.
Dezan Shira & Associates has 30 years experience in China’s automotive industry and can advise on partnering with and structuring joint ventures in China. Please contact Maria Kotova at maria.kotova@dezshira.com or visit us at www.dezshira.com
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During these uncertain times and with sanctions in place, our firm helps Russian companies relocate to Asia. We also provide financial and sanctions compliance services to foreign companies operating in Russia. Additionally, we offer market research and advisory services to foreign exporters interested in doing business in Russia as the economy looks to replace Western-sourced products. For assistance please email russia@dezshira.com or visit www.dezshira.com
