Automobile industry analyst concludes: Electric vehicles don't yield the same profits expectations suggest
In Russia, the development of electric transport is not proving as profitable as anticipated, according to automobile expert Jan Håijer, Vice-President of the National Automobile Union. The city's budget is not infinite, and the challenges facing the electric vehicle (EV) market in Russia are numerous.
High financing costs are a significant issue, with interest rates on new car loans soaring between 19-24% due to government war spending and inflation control measures. This makes buying EVs more expensive for consumers, limiting profitability for sellers despite government subsidies on preferential loans that require very high income thresholds for EV loans compared to conventional cars.
Market distortions from sanctions also impact the EV market. Many new cars, including EVs, are imported via unofficial parallel imports, often circumventing manufacturer channels and sanctions. This grey market supply line affects official sales and profitability, with luxury EVs remaining popular among the wealthy elite but less accessible to the broader market.
The withdrawal of foreign automakers from Russia following the Ukraine invasion has further shrunk the market scale and profitability. Most foreign brands have left Russia, except Chinese companies, which now dominate about 50% of the market. Russia’s largest domestic producer, Avtovaz, struggles with production cuts and declining sales.
Despite government incentives aimed at stimulating EV purchases, these structural issues—especially very high loan interest rates and market fragmentation caused by sanctions and import irregularities—weaken overall profitability in Russia's EV market. This contrasts with more robust growth and profitability in global EV markets like China and Europe.
As a result, charging stations in Moscow have started charging fees, and the expert predicts that free parking and toll-free highways may disappear due to the development of electric transport. Moreover, electric vehicles are expensive, and only those who can charge batteries at home can afford them. The high cost of electric motors means that even with government incentives, the total cost of ownership remains prohibitive for many Russians.
In conclusion, the challenges facing the electric vehicle market in Russia are significant, and profitability remains elusive despite government efforts to stimulate growth. The high cost of financing, market distortions from sanctions, and the withdrawal of foreign automakers have all contributed to a challenging market environment for EVs in Russia.
- The high financing costs, with interest rates on new car loans surging between 19-24%, create a significant barrier for the purchase of electric vehicles (EVs) in Russia, making them more expensive for consumers and negatively impacting the profitability of sellers.
- The market distortions from sanctions, such as the grey market supply line for EVs, affect official sales and profitability, with these issues, along with high loan interest rates and the withdrawal of foreign automakers, contributing to a challenging market environment for EVs in Russia.
- The development of the energy and technology sectors, such as the growth of charging stations and the implementation of electric vehicles, is hindered by the high costs associated with electric motors, making EVs an expensive option for most Russians, even with government incentives.
