Dusseldorf Volkswagen is taking action in China against possible gray market exports to Russia. As a company spokesman confirmed on request, VW vehicles produced in China should not be exported to Russia. Already last year – immediately after the Russian invasion of the Ukraine – the Wolfsburg car manufacturer had stopped its exports from Europe to Russia. However, this sanction could be circumvented with gray market exports from China.
There are close economic ties between Russia and China, and that also applies to the car business. As it was also said from corporate circles in Wolfsburg, there are “established trade routes from China to Russia” especially for used vehicles. So used cars have always been sold from the People’s Republic to Russia.
A manufacturer like VW cannot influence the used car business because it no longer owns the vehicles. However, Chinese gray market dealers could now use the long-established trade routes for used vehicles to sell new cars produced in China to Russia.
Volkswagen China acts quite autonomously
The gaps in the Russian new car market caused by the delivery stops from the West could theoretically be closed by selling Chinese VW models. Volkswagen in China acts comparatively autonomously and has only limited links with the Wolfsburg-based group.
In the People’s Republic, VW mainly operates joint ventures with state-owned Chinese automakers, which limits the influence of the German side. The geography would also make exports easier: China and Russia are linked by a border that is more than 4,000 kilometers long and cannot always be fully controlled. New cars from China can therefore always find their way to Russia.
“Grey market exports can never be ruled out,” says the VW Group. However, there is no evidence that the new car business from China to Russia is currently being carried out on a large scale. VW’s own dealers are instructed not to allow exports to other countries. To date, Volkswagen China has only produced for the Chinese market.
Volkswagen keeps a black list
However, Volkswagen has no direct influence on economically independent Chinese gray market dealers who could secure new car contingents. The VW Group is therefore trying to prevent a possible gray market export from the outset.
As the automaker confirmed in Beijing, there is a so-called “blacklist” in the company in which conspicuous Chinese vehicle wholesalers are listed. Such traders may have tried exporting to other countries in the past.
In principle, these companies would not be supplied with their own cars, according to Volkswagen. It is therefore difficult to sell vehicles from China to Russia. Spare parts are also not sold to Russia by the Chinese Volkswagen subsidiary.
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After the Russian invasion of Ukraine, the VW group more or less decided to completely give up its own business in Russia. The sale of new vehicles was stopped in spring 2022. Deliveries of spare parts are only available to a limited extent within the scope of warranty claims.
The production lines at the Russian plant have been standing still for a year.
(Photo: Bloomberg/Getty Images)
Volkswagen quickly decided to stop selling. The Wolfsburg-based group is struggling with its own production facilities, above all with its own car factory in Kaluga, southwest of Moscow. Other car manufacturers such as Toyota and Renault have already given up their own vehicle production in Russia.
At Volkswagen, it remains unclear how the factory in Kaluga and its around 4,000 employees will continue. Production there has now been idle for almost a year.
Volkswagen is likely to give up the plant in Russia
According to Russian press reports, Volkswagen is talking to potential buyers from Kazakhstan and Russia. At the end of last year, Skoda CEO Klaus Zellmer said in an interview with the Handelsblatt that “we are currently exploring all possibilities”. A decision could be made in the “coming months”. Within the VW Group, Skoda is responsible for all business in Russia.
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At the beginning of June last year, Volkswagen ended its joint venture with the Russian automaker GAZ, which belongs to the empire of oligarch Oleg Deripaska. In the industrial city of Nizhny Novgorod east of Moscow, the two companies had been producing VW and Skoda models together for a good ten years.
The VW Group employed around 200 of its own staff in Nizhny Novgorod. The German car manufacturer had presented a severance package for these employees. Anyone who had left the company voluntarily was paid their VW salary until the end of the year.
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