German carmakers' legal entities remain in russia

This is reported in a publication by Deutsche Welle.

"One German company after another is found to have active Russian legal entities. It recently emerged that Porsche still has three structures in Russia. As DW has discovered, BMW Bank, a subsidiary of the BMW Group, is also continuing to operate. And the Russian branch of Volkswagen Bank was only sold at the end of 2024," the publication states.

The presence of the German automotive industry on the Russian market is explained by the fact that it is not easy to sever ties with it. There is a long queue of those willing to sell assets at a large discount, but there are no takers willing to return to Russia, writes DW. ‘All attempts to sell these companies have so far been unsuccessful,’ Porsche told the publication.

German cars continue to be supplied to Russia through the so-called ‘parallel import mechanism,’ which Vladimir Putin legalised in 2022. Car deliveries go through third countries, usually via Central Asia, Belarus and Georgia. And this is happening without the participation or consent of the manufacturers themselves, the article says.

In total, less than 25,000 new cars of three German brands were imported into Russia in 2024, which is not much, DW notes. ‘For comparison, 436,100 cars were sold by Lada, the most popular brand in the country, and 28,500 by the Chinese brand Tank (tenth in the list of the most popular),’ the article says.

‘In 2021, Volkswagen alone sold 86,000 passenger cars in Russia, according to Autostat, and its subsidiary Skoda sold over 90,000. BMW sales amounted to almost 47,000,’ DW compares.

The dynamics of imports of German-brand cars in 2024 varied depending on the brand and price segment. According to the publication, citing Autostat data, deliveries of more expensive models increased significantly, while those of more affordable models decreased. At the same time, imports of all Volkswagen models fell by 25% compared to 2023 and amounted to about 5,000.

Deliveries of expensive cars to Russia violate EU sanctions. Until mid-2023, the ban applied to cars costing more than €50,000. It was circumvented by underestimating the price in export documents. With the adoption of the 11th package of sanctions, the measures were tightened. The ban covers all new and used cars with an engine capacity of 1.9 litres or more, as well as all electric and hybrid vehicles.

The fight against violators has intensified recently, German sanctions policy expert Christian von Soest from the Institute for Global and Regional Studies (GIGA) told DW. ‘I think that the German government – particularly under pressure from the media – is now taking much tougher measures than it did immediately after Russia's invasion of Ukraine,’ he said.

More than 40 criminal cases have been opened in Germany alone against car dealers who supplied premium cars to Russia in circumvention of sanctions. Hundreds of cars have been confiscated. In 2024 alone, three people were sentenced to prison terms, according to the publication.

Car manufacturers are conducting internal investigations. At the end of 2024, the BMW Group reported that it had independently uncovered a scheme to deliver hundreds of cars from Hanover to Russia and dismissed the employees responsible.

‘However, given that sales of German cars in Russia, although sharply reduced, still number in the tens of thousands per year, the measures taken appear limited. In December 2024 alone, when the BMW Group announced its investigation, more than 900 of its cars were imported into Russia,’ writes DW.

Source: Economic pravda, Deutsche Welle