of a new production in a car plants in Western Russia.

(audience applaud)

Today, it is Chinese cars coming off the assembly line.

The factory produced tens of thousands of vehicles

including Ford trucks, German BMWs,

and South Korean Hyundais every year

until Russia's invasion of Ukraine.

As international sanctions prompted foreign automakers

to leave the country, Chinese brands filled the void,

making billions of dollars.

- Car makers who have been struggling

in the domestic market in China,

they're finding an opportunistic moment when it comes

to the Russian market.

- [Narrator] Here's how Chinese car makers are profiting

from the Western corporate exodus and what it means

for Russia's auto markets.

Car making is one of Russia's main industries.

It employed some 300,000 people directly

and produced vehicles and parts worth

about $42 billion in 2020.

- The first Renault created for the Russian market.

- [Narrator] Foreign automakers opened factories

and partnered with local brands,

pushing Russia into the ranks

of the world's top car producers,

and Russians eagerly embraced foreign cars

with Japanese, Korean, and European brands

dominating the market for years.

(tank fires)

But Moscow's invasion of Ukraine hit the industry hard.

Western sanctions cut off Russia's access

to global supply chains for essential parts

such as computer chips,

prompting many foreign brands to halt production

or withdraw from the country.

Soaring inflation and uncertainty contributed

to a dramatic drop in car sales in the country last year.

But assembly lines didn't stay idle for long.

Demands started to pick up as Chinese brands stepped in.

Car dealerships across Russia

started reopening under new brands.

For example, this showroom outside Moscow

changed from Nissan to Kaiyi from China.

Russian buyers became more familiar with Chinese cars.

Chinese SUVs have even been spotted

in the Kremlin's motorcades.

By mid 2023, the list of the 10 most popular car brands

in Russia looked very different to before the war.

Six of them were Chinese.

This year, Russia became the number one buyer

of Chinese vehicles, spending some $6 billion

in the first four months of 2023,

helping China to become the world's largest auto exporter.

- The exports to Russia have got an outsize importance,

especially for the car makers who have struggled

to pivot to a successful EV strategy.

Within China, the sales of petroleum-powered vehicles

have dropped, so they now have some excess capacity

and Russia presents a good opportunity for these car makers.

- [Narrator] But Russia's markets also poses challenges.

- As Chinese car brands become more mature,

I think a lot of them are seriously considering the prospect

of one day become the world's biggest auto manufacturer.

And in the grand scheme of things,

Russia may not be a big consideration

for them because of the constraints

in this market at present.

- [Narrator] Chinese automakers are also not immune

to the bad publicity that comes with working in Russia.

In June, in a symbolic gesture,

Ukraine branded Chinese maker Geely

as a sponsor of war for continuing operations in Russia.

- Companies like Geely have multiple brands

and some of these brands are trying to explore

the Western European market.

So if they make a big push in Russia,

then it may cause them other problems

in terms of real political risks

because it may not be well regarded

in front of Western European consumers.

- [Narrator] Geely declined to comment

on the challenges related to its operations in Russia.

Russia's after door plants,

which now produces Chinese passenger cars,

didn't respond to a request for comments.

Chinese automakers expansion into the Russian market

highlights the ever closer ties between Beijing and Moscow.

At the moment, the relationship appears

to be mutually beneficial.

However, the question is whether Chinese brands

are willing to keep taking the risks associated with Russia

and manage the unpredictable nature

of doing business there in the long run.

(tense music)