“Muscovites” are no longer so expensive

Moskvich has reduced prices for two petrol models – Moskvich 3 and Moskvich 6. We are talking about models produced in 2023, and the size of the reduction reaches 712 thousand rubles, or almost 30%. When asked about the reasons for the decline, the company only says that it is “constantly working to bring our brand closer to people” and “has developed and implemented a new approach to pricing.”

Cases of not just providing discounts, but reducing the recommended retail price (RRP) of a car are an extremely rare occurrence in the market. Car prices in Russia have been growing almost continuously since the 2015 crisis, and since the pandemic the growth has even accelerated, so that in December 2022 the President of the Russian Federation gave instructions to “ensure constant control over the formation of car prices to prevent their unreasonable increase.” Despite this, in 2023, according to Rosstat, domestic cars have risen in price by an average of 17.57%.

But after the Central Bank raised the rate in the fall of 2023, the pace of updating price lists really slowed down. The weakening of demand with ambitious sales plans led to the accumulation of large warehouses of cars by the beginning of 2024 – the head of Avtodom, Andrei Olkhovsky, in an interview with Kommersant, spoke about “carryover balances” of more than 200 thousand cars, or up to 30% of the market. Manufacturers are still maintaining the discounts announced before the New Year, and two companies – Moskvich and its Chinese partner JAC – have also reduced their RRP. True, JAC cut prices for only one model, JS3, and not as radically as Moskvich – by 200 thousand, or about 10%.

But the severity of the problem between the Chinese supplier and Moskvich is apparently different. The manufacturer’s margin in the passenger segment usually averaged 5–10%, reaching 12% for SUVs. Discounts or price revisions of 30% are unlikely to be covered by the car plant’s margins. Apparently, Moskvich took such a drastic step to get rid of warehouses. Typically, warehouses become a headache for dealers, not the manufacturer. Dealers sometimes have to sell cars at a loss in order to receive a bonus for meeting the delivery plan or to make money on a more popular brand model. In the case of Moskvich, there was probably no point in such a scheme. The discrepancy in production and sales volumes of the brand is truly amazing. In November 2023, a brand representative spoke about plans to produce 27 thousand cars over the year, including 4.2 thousand electric vehicles, but the plant ultimately sold “more than 15.3 thousand cars (including more than 1.5 thousand electric vehicles)”.

We probably shouldn’t expect a massive price reduction. But brands that have not found their niche even in a relatively empty market will be forced to “bring brands closer to people.” At least until Moskvich becomes as beautiful as Moscow, for example, by changing its model range.