Tesla To Invest In Russian EV Manufacturing?

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Tesla has highest sales volume penetration of nascent Russian EV market 

Elon Musk, Tesla’s CEO, has stated that the EV manufacturer is “close to establishing a service presence in Russia” adding that the electric car company was thinking of doing the same for Kazakhstan and neighboring countries. He also announced that Tesla was considering manufacturing its vehicles in Russia for the EAEU market. Musk was speaking at the Russian educational program “New Knowledge”, which he was attending online.

“There is a lot of talented energy in Russia, and I think there should be more dialogue and communication between Russia and the United States” Musk stated.

Tesla’s moves come as the company have had to rethink its Asian manufacturing sales chains, which it had intended to service mainly from its manufacturing facilities in Shanghai. Political tensions between the United States and China and the potential for a far-reaching US ‘Strategic Competition Act’ targeting China and limiting its ability to source US manufactured component parts such as semi-conductors have made the company rethink its manufacturing and sales chains.

Interestingly, China has a free trade agreement with Russia and the Eurasian Economic Union, which includes Armenia, Belarus, Kyrgyzstan, and Kazakhstan, although tariff reductions to validate this have yet to be agreed.

Russia is an attractive market for auto manufacturers, and possesses strong supply chains and development expertise in this area. It is a leader in EV production, although attracting a global brand such as Tesla to manufacture in the country would be a real coup. As of January 1 this year, there were 10,836 electric vehicles registered in Russia, representing an overall uptick of 71% over 2019 figures.

The market leader in Russia is Tesla cars at 32% of all sales. Half of these new EVs are registered within European Russia. 8%, or 867 EV’s were registered in Russia’s Far East.

Moscow leads in new sales, with 240 new electric cars purchased in 2020. St Petersburg follows with 69, and the Moscow region – which includes suburbs of the capital, but not the capital itself – weighed in with 60. Farther to the south, in the Black Sea’s Krasnodar Region, 36 new electric cars were registered. The Far Eastern Primorsky region on Russia’s Pacific coast saw 31 new electric cars registered. The Siberian regions of Sverdlovsk and Novosibirsk saw the purchase of 21 and 20 new electric cars, respectively. The Perm, Irkutsk, Tyumen and Chelyabinsk regions saw a combined total of 10 electric car sales.

Another surprising development was the sales figures for used electric cars. By the end of 2020, 5,237 of those were sold throughout the country, representing a 60% increase over the previous year. Of those cars, 93% are Nissan Leafs, most of which are right-hand drive vehicles imported to Russia’s Far East from Japan.

The Russian government has put into place a series of measures meant to assess the popularity of electric cars, including a temporary elimination of import taxes on electric vehicles, which will last through until the end of this year, although there have been suggestions this may be extended.

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Russia Briefing is written by Dezan Shira & Associates. The firm has 28 offices throughout Eurasia, including China, Russia, India, and the ASEAN nations, assisting foreign investors into the Eurasian region. Please contact Maria Kotova at russia@dezshira.com for Russian investment advisory or assistance with market intelligence, legal, tax and compliance issues throughout Asia.

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