Russian car sales plunged 79% in April amid Ukraine sanctions

Sales of new cars this year are expected to shrink by at least 50 percent, the AEB said last month, after a 4.3 percent increase in 2021.

Demand is unlikely to recover due to a decline in real incomes, making the car industry the most affected industrial sector, VTB Capital analysts said.

The Russian central bank raised its key rate to 20 percent in late February in an emergency move aimed at containing financial risks days after Russia launched what it calls “a special military operation” in Ukraine. It has since trimmed the rate back to 14 percent.

“Parallel imports won’t help lower the deficit tangibly due to high costs,” VTB Capital said.

Last week, Moscow published a list of goods from foreign carmakers, technology companies and consumer brands that the government has included in a “parallel imports” scheme aimed at shielding consumers from business isolation by the West.

Car production is heavily dependent on imports, with a recent report by Moscow’s Higher School of Economics estimating that over half of the value added in the sector comes from abroad.

Just-in-time inventory management, adopted to make the industry more efficient, meant that the impact from sanctions was felt almost immediately.

Reuters contributed to this report