Adaptation of Russian Automotive Industry to the Impact of New Sanctions

Abstract

One of the major industries significantly affected by the new sanctions is the Russian automotive industry. The withdrawal of Western brands, restrictions on the import and maintenance of foreign cars and their components already imported into the country, as well as the curtailment of car production in Russia have significantly changed industry and market structures, accelerated price growth and led to a change in the characteristics of products on the market towards their technical simplification. The research methodology is based on statistical analysis and comparison of discrete institutional alternatives. Using the methods of the new institutional economics, the main directions for adapting business models in the Russian passenger car industry to sanctions restrictions were identified. In particular, special attention is paid to the specifics of international transactions in the context of sanctions. Based on the analysis of the process of changing business models in the market, it can be concluded that current changes only partially compensate for the impact of sanctions, but at the same time create restrictions for the long-term development of the domestic car market, undermining incentives for technological improvement of cars on the market. Moreover, current measures can have a significant negative impact on consumer welfare, provoking an increase in the volume of unsatisfied demand. To solve this problem, it is advisable to adjust the state regulation of the domestic automotive market. In particular, it is advisable to ease foreign trade restrictions (including reducing the size of the recycling fee for cars) and review the import substitution policy in terms of providing the automotive industry with technologically sophisticated components.